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Total says Norvarg Arctic field not commercially viable

* Gas field was key in reviving interest in Norwegian Arctic

* Resource view is half earlier view of 10-50 bln cubic metres

* Sees potential for up to 100 mln boe at N.Sea prospect

By Gwladys Fouche

STAVANGER, Norway, Nov 20 (Reuters) - French energy firm Total said on Wednesday development of the Norvarg gas field in Arctic Norway was not commercially viable, another signal that oil firms are reining in their optimism about the Arctic.

Norvarg was one of the two discoveries together with Statoil's Johan Castberg in 2011 to revive interest in the Norwegian side of the Barents Sea. They helped rejuvenate the prospects of Norway as an oil and gas producer.

The announcement on Wednesday underlines the challenges of developing oil and gas in the remote region. Statoil in June suspended the $15.5 billion Castberg project as it hopes to find more resources to make the project economically viable.

"The problem we have on Norvarg is productivity," Martin Tiffen, managing director of Total Norway in an interview.

A well drilled recently at the Norvarg field flowed at a rate of just under 200,000 cubic metres a day, he said.

"It is very hard to see how we can have a commercial development with that kind of flow rate. That is our challenge today. With flow rates like that, it does not matter how much gas you have in place," he said, without giving indications of commercially viable flow rate expectations.

The resource estimates for the field were also lower following the drilling of a second well in July, he said.

Originally the field was expected to contain between 10 to 50 billion cubic metres of gas.

"We are at 50 percent below that," he said.

Oil companies are keen to drill in the Arctic because it could hold up to 90 billion barrels of oil, according to the U.S. Geological Survey.

But firms scaled back exploration plans after the grounding of a Royal Dutch Shell drilling rig off Alaska on New Year's eve caused a public uproar.

Total's partners in Norvarg are Canada's Ithaca, Norway's Statoil, Det norske, Rocksource and North Energy.

Further south, Total will start drilling the sea bed in the North Sea at a prospect called Trell in a week or two.

At most Trell could contain up to 100 million barrels of oil equivalent, Tiffen said, although Total expected somewhat less than that. Results are due for the well early next year.

Production in Norway accounts for 12 percent of Total's overall production, with a daily production of some 275,000 barrels of oil equivalent per day.

Norway was the French group's biggest production contributor for years until Nigeria replaced it last year.