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Norwegian energy giant Statoil ASA (STO - Analyst Report) and its partners have decided to halt expansion work at the Snoehvit natural gas field in the Arctic Barents Sea. Expansion activities are dependent on new gas discoveries and the current reserves are insufficient for any further work.

The company may build a pipeline for future capacity increase but at present there is not enough gas in place for a new liquefaction facility at Snoehvit.

Statoil had been planning the Snoehvit expansion over the past 18 months. However, the company will now focus on its existing liquefied natural gas (LNG) facility at Melkoya (Train I) and Snoehvit through phases 2 – 4 for Train I.

However, despite the setback, Statoil remains committed to the Arctic, as evident from its announcement to invest about 40 billion Norwegian crowns ($6.99 billion) in its Snoehvit natural gas field to continue production until 2040.

Statoil ASA is a Norway-based major international integrated oil and gas company. The company emerged in its present shape following the acquisition of Norsk Hydro’s oil and gas business, which was completed on October 1, 2007. With effect from November 2, 2009, the erstwhile StatoilHydro ASA came to be known as Statoil ASA.

We have a favorable outlook on Statoil’s long-term production growth, given the company’s growing upstream presence in the emerging basins of the Barents Sea, West Africa and the deepwater U.S. Gulf of Mexico (GoM). We also believe that the growing share of natural gas in Statoil’s NCS volume mix and its extensive interests in infrastructure assets facilitate its leadership position in the European natural gas market.

Statoil, which recently contracted Schlumberger Limited (SLB - Analyst Report) for electric wireline logging services on the NCS, carries a Zacks #2 Rank, which translates to a Buy rating for a period of one to three months. Longer term, we maintain a Neutral recommendation on the stock.

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