3 Min Read
By Andrew Callus
LONDON, Jan 2 (Reuters) - BP began production from the Skarv oil and gas field it operates off Norway's coast on the last day of 2012, hitting a reduced new project target with just hours to spare and after a months-long delay.
Announcing the move on Wednesday, the British oil company brought its total 2012 major project start-ups to five, having targeted six earlier in the year with Skarv scheduled for the first half.
Skarv, a big project by North Sea standards with an expected life of 25 years, will ramp up production to around 125,000 barrels of oil equivalent per day (boe/d) within the first six months to an expected maximum daily rate of 165,000 boe/d by year end, BP said.
Just over half of the output from the field, which contains an estimated 43 bcm of gas and 13 million tons of oil, will be oil and condensate and the rest gas.
As operator, BP has a 24 percent interest in the field, which will add about 1 percent to its output of oil and gas. State-backed Norwegian group Statoil has a 36 percent stake and will see its output boosted by 2.5 percent.
The other partners are Germany's E.ON E&P Norge AS with 28 per cent and Polish gas monopoly PGNiG with 12 percent.
For PGNiG, the project is its biggest Norwegian asset and is part of efforts to reduce its reliance on Russian gas. It said it expects its first major offshore project to lift its Norwegian output to about 370,000 tonnes of crude oil and 0.3 billion cubic metres (bcm) of gas in 2 01 3 .
The state-owned company has forecast revenue from its Norway operations at an annual total of between $400 million and $500 million in the next three years.
Skarv's startup was described by BP as a key operational milestone in one of the core high-margin areas outlined in a Dec. 3 strategy update.
BP's success rate in its core business of exploring for and producing oil and gas is under scrutiny as it fights to put behind it the costs of its 2010 U.S. oil spill and troubles with its investments in Russia.
Skarv has suffered delays as its developers worked to put into operation a groundbreaking floating production storage and offloading (FPSO) vessel, built for the tough conditions 210 kilometres off Norway's west coast in 350 to 450 metres of water.
The delay caused Norway to miss its 2012 crude output target.
Analyst Peter Hutton of RBC Capital Markets noted BP had yet to outline capital spending plans for the field.
In BP's list of top projects, Skarv was preceded by four other startups in 2012: Clochas Mavacola and PSVM, both in Angola, Galapagos in the U.S. Gulf and Devenick in the North Sea.
A sixth 2012 project, Angola LNG, is now expected to start up in 2013, one of nine other projects slated for the coming two years.
The delay to Skarv had forced PGNiG to cut its overall output goals for 2012 and 2013 in October. Now the group expects to extract 4.8 bcm of gas and 1.12 million tonnes of crude in 2013, compared with an earlier estimate of 4.9 bcm and 1.24 million tonnes.