UPDATE 1-Statoil to build US shale crude shipping capacity

Mon Oct 17, 2011 3:20pm EDT

Related Topics

* Statoil to expand take-away capacity as part of deal

* $4.4 billion deal high premium for acreage-analysts

* Statoil plans to add four rigs in the coming few years

By Selam Gebrekidan

NEW YORK, Oct 17 (Reuters) - Norway's Statoil (STL.OL) will build more crude shipping capacity in the Williston Basin of North Dakota and Montana as part of its $4.4 billion bid for Austin-based Brigham Exploration BEXP.O a company executive said on Monday.

The Norwegian state oil company said it would build more shipping capacity, with a focus on pipelines, but did not commit itself to any specific pipeline project.

Analysts said that because of the deal's steep cost, the oil major will have to invest in infrastructure projects to recover some of its investment as it ramps up production.

Statoil is looking to enter the Bakken and Three Forks shale plays in North Dakota with its purchase of Brigham, a company that entered the race to unlock North Dakota's massive unconventional oil reserves in 2005.

The deal, announced on Monday, will buy the cash-rich international oil company a 275,000 net-acre shale frontier in North Dakota and 100,000 acres more in Montana, where output growth is outpacing existing capacity to move crude to refining hubs in the Gulf Coast and elsewhere.

Statoil plans to add more take-away capacity in the region, building on Brigham's $120 million-a-year investment in the past, according to Bill Maloney, Statoil North America Executive Vice President. Brigham had focused its efforts on building pipelines.

Analysts said it is in Statoil's interest to invest in additional infrastructure in the region to boost production and get oil to customers.

"They paid a pretty high premium for what the acreage really is worth. They need to develop the assets quickly so they will improve the infrastructure," Sven Del Pozzo, senior analyst with energy consultancy IHS Herold said.

Brigham currently produces 21,000 barrels of oil equivalent a day in the Williston basin, home to both the Bakken and Three Forks shale plays, and has enough acreage to increase output to up to 100,000 boed in five years, according to a Statoil press release.

Following the successful completion of the deal, Statoil plans to increase the number of drilling rigs from 12 to 16 in the coming few years, starting with the addition of two rigs in the first quarter of 2012, Maloney added.

Recent advances in horizontal drilling and hydraulic fracturing technologies have repeated the shale gas revolution in oil-rich shale prospects like the Bakken in North Dakota.

North Dakota's oil output reached a record high above 444,000 barrels-per-day in August, thanks primarily to fracking technology, which pumps chemical-laden water and sand into wells to retrieve oil, according to state regulators.

Total U.S. oil production from shale plays is currently estimated at 700,000 bpd but could grow to as much as 2 million bpd in the coming five to seven years, industry operators say.

As cheap gas from the shale prospects inundated the market and halved the price of natural gas over the past three years, exploration companies have increasingly turned their attention to oil fields.

Statoil is one of the latest oil majors to do so. The company has a stake in the Marcellus shale gas project with Chesapeake (CHK.N) in north-east America and owns acreage in the Eagle Ford prospect in Texas, together with Canada's Talisman (TLM.TO).

(Reporting by Selam Gebrekidan; Editing by David Gregorio)

FILED UNDER: