UPDATE 2-Statoil to build $16 bln oil hub on Europe's northern tip

Tue Feb 12, 2013 9:51am EST

Related Topics

* Facility can accommodate future oil finds

* First project will be Skrugard and Havis in Barents sea

* Skrugard/Havis to produce 200,000 barrels per day

* Early cost estimate at 80-90 bln crowns (Adds quotes, exploration plans, background)

By Gwladys Fouche

VEIDNES, Norway, Feb 12 (Reuters) - Norway's Statoil will spend up to $16.3 billion to build a new oil hub near the northern tip of the European continent, banking on finding more oil in an ambitious Arctic exploration campaign.

Statoil, a pioneer in Arctic oil and gas production will bring its huge Skrugard and Havis finds in the Barents Sea into production by the end of 2018 and plans an onshore terminal that will cope with more crude once work in the area takes off.

"This is part of the ambition of making northern Norway the country's next big petroleum region," Oeystein Michelsen, Statoil's development chief for Norway, said on Tuesday.

"Because of this potential, it is important to have a concept that also ensures the necessary flexibility to tie in future discoveries to the Veidnes oil terminal."

Statoil plans to explore nine new prospects in the Arctic Barents Sea over the next two years with four near Skrugard, hoping to find more oil to tie into the development.

Oil at the new terminal will be stored in two mountain caverns near Veidnes, 1,400 km (870 miles) north of Oslo, before loading into tankers.

"Skrugard and Havis were found in areas considered the worst ones for exploration," Knut Harald Nygaard, Statoil exploration director for the Skrugard area said.

"So now, the area (to the east) looks promising," he said. "We believe in more potential in the area where Skrugard and Havis lie."

The two fields, lying in the same license, hold up to 600 million barrels of oil equivalent and production is seen at around 200,000 barrels per day, making it one of Norway's top fields.

It could start producing in the fourth quarter of 2018 and Statoil plans a floating platform in waters up to 390 metres deep.

Interest in the Barents has risen sharply since the Skrugard find in 2011 and Norway plans to sell 72 licenses in the area this summer, hoping to give exploration new momentum.

It also expects to open the eastern part of the Barents to the industry next year after settling a 40 year border dispute with Russia.

Energy firms have been slow to explore the Barents as it lacks a developed infrastructure, making initial investments higher than elsewhere.

The government hopes that shepherding the industry north through the licensing round, it can create economies of scale, providing firms an incentive to invest.

One of the major problems is that no gas pipelines exist in the area, so energy firms either need to build a 25 billion crown ($4.53 billion), 1,000 kilometre subsea pipeline or must build costly LNG facilities.

Statoil is the operator of the Skrugard/Havis license and holds a 50 percent stake, while Italy's Eni has 30 percent and state holding firm Petoro has 20 percent.

($1 = 5.5149 Norwegian krones) (Writing by Balazs Koranyi; editing by William Hardy)

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