UPDATE 2-Norway's giant Johan Sverdrup oilfield delayed a year

Fri Dec 20, 2013 5:58am EST

Related Topics

* 1st phase of development seen costing $16-21 bln

* Oil, gas resources seen at 1.8-2.9 bln boe

* Previous estimate was in range of 1.7-3.3 bln boe

* Shares of Lundin, Det norske dive on news

* Scheme one of Norway's biggest industrial projects (Adds analysts, shares, background)

By Gwladys Fouche and Ole Petter Skonnord

OSLO, Dec 20 (Reuters) - Development of the North Sea's giant Johan Sverdrup oilfield will be delayed by a year as one of the biggest industrial schemes undertaken in Norway has become more complex and costlier than thought, sinking some of the partners' shares.

Norway's Statoil, Det norske and Petoro, Sweden's Lundin Petroleum and Denmark's Maersk Oil were expected to announce this month which type of installation they would use to develop the field.

On Friday, they said they would announce it in early 2014.

Production will start at the end of 2019, rather than the fourth quarter of 2018 as previously thought. The resource estimate for the field was also lowered.

Johan Sverdrup is the most crucial project in the portfolio of the firms concerned and the disappointment hit their shares.

"This is really bad. This reduces the present value of Johan Sverdrup by some 20 percent," John Olaisen, an analyst at ABG Sundal Collier in Oslo, told Reuters. "Twelve percent due to the lower reserves and 8 percent due to the delay."

Several industry players have warned in recent weeks that oil firms' development plans off Norway were too optimistic and that they underestimated capacity constraints and rising costs.

Lundin Petroleum's shares were down 9.9 percent at 1009 GMT, Det norske's were down 13.5 percent, and Statoil's were flat. All lagged the European oil and gas index, up 0.41 percent.

Maersk Oil is a unit of shipping empire Maersk, whose shares had less impact from the news. They rose 0.18 percent.

MORE COMPLEX, MORE EXPENSIVE

The first phase of the Johan Sverdrup project would cost between 100 billion and 130 billion crowns ($16.2-$21.1 billion), partner Det norske said on Friday, which is more expensive than anticipated.

In November, the head of Lundin Petroleum Norway told Reuters an industry estimate of 50 billion crowns in investments until 2018, the then starting year for production, was a "good rough figure".

Capital expenditure until the attainment of peak output was now estimated at $22-29 billion, according to Trond Omdal, an analyst at Arctic Securities in Oslo.

"(This is) well above our $21 billion estimate and the (consensus) for $22 billion," he wrote in a note to clients.

Statoil said the project had become more complex.

"Now that the concept has been more matured, we have a more realistic picture of the complexity of the project," Statoil spokesman Oerjan Heradstveit said. He declined to comment on the cost levels.

"CHAMPAGNE-LIKE" OIL

The find came as a surprise when it was made in 2010. Numerous wells had been drilled over decades in the area but yielded little. In 1971, French oil firm Elf Aquitaine drilled a well metres away from the field but missed it.

At the time of the discovery Statoil's exploration chief gushed about the oil's "champagne-like" qualities, and the field has rejuvenated the prospects of a mature oil region, once written off by the world's biggest energy companies.

Norway's oil production has been on the decline since peaking at 1.1 billion barrels in 2000. In 2013, oil output is seen falling to 538 million barrels, from last year's 561 million.

Johan Sverdrup contained between 1.8 billion and 2.9 billion barrels of oil equivalent (boe), the partners said on Friday, lowering the midpoint of the resources by 6 percent to 2.35 billion boe.

This could still make it the fourth-biggest oil discovery made off Norway, the world's eighth-largest exporter of crude, after Statfjord, Ekofisk and Oseberg. At 2.9 billion boe, it would be the third-biggest.

The previous resource estimate for the field was 1.7-3.3 billion boe.

The partners still want to award a FEED (Front End Engineering and Design) contract "as soon as possible in order to ensure continued progress for the project", Det norske said in a statement.

Norwegian offshore supplier Aker Solutions has said it is working to secure contracts for the project. It will face competition from suppliers in Asia and elsewhere.

The partners hope the development of the project can be approved by the Norwegian parliament in the spring of 2015. (Editing by William Hardy and Dale Hudson)

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