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STO Moves Ahead on Smorbukk South

Zacks Equity Research

Norwegian oil and gas company Statoil ASA (STO) and its partners have resolved to proceed with the Smørbukk South Extension project. The project is estimated to cost around NOK 3.5 billion.

Discovered in 1985 – the Smørbukk South Extension – is estimated to hold recoverable reserves of 16.5 million barrels of oil equivalent. Statoil has been successful in turning the discovery into a profitable project after years of experience from Aasgard and the availability of existing facilities.

The project is planned to be developed by means of a subsea tieback to the existing infrastructure in the area – Aasgard A floating production, storage and offloading vessel. The project is estimated to have a lifetime of 12 years.

Smorbukk will produce from a single multilateral well having two producing branches. It also comprises the installation of a new subsea template with available slots for future wells. The new well technology is believed to enhance recovery from the Smorbukk South reservoir. The company has made pre-investments to reduce the time from project sanction to production start-up.

The company proposes to award numerous contracts for the development, with Nexans already contracted for umbilicals in 2012. Drilling activities are likely to commence in the beginning of 2015, while production start-up is scheduled for Sep 2015. The project is expected to extend the lifetime on Asgard A and aid in the development of other projects and opportunities in the area.

Smørbukk South Extension forms part of the Åsgard unit. Statoil, the operator of Asgard, has a stake of 34.6%. The other partners in the license are Petoro AS, Eni SpA (E), Total SA (TOT) and ExxonMobil Corporation (XOM) holding 35.7%, 14.8%, 7.7% and 7.2%, respectively.

Statoil holds a Zacks Rank #2 (short-term Buy rating).

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