Norwegian oil major Statoil ASA (STO - Free Report) plans to use seismic cables on the seabed to enhance oil recovery by 30 million barrels of oil from a pair of its fields — Snorre and Grane — off Norway, worth around NOK 19 billion at current oil prices.
Statoil has contracted the American company Geospace Technologies for the delivery of cables valued at NOK 900 million, as part of permanent reservoir monitoring. DeepOcean and Reef Subsea Norway A/S have been engaged for installation of the cables at Snorre and Grane, respectively. The installation at Snorre is expected to commence in 2013 while the same would begin in 2014 for Grane. Cumulatively, the installation works is estimated to cost around NOK 700 million.
The project is considered to be the world’s largest seismic project of its kind with around 700 kilometers of seismic cables to be permanently arranged in trenches on the seabed of both fields. Approximately 500 kilometers of cable is to be laid at Snorre and 200 kilometers at Grane – together covering a total area of 240 square kilometers.
Statoil believes the technology will generate continuous and enhanced seismic imaging versus the conventional way of shooting seismic from a vessel on the surface. It will facilitate the company to achieve enhanced data relating to the reservoir, which will aid in establishing the most favorable location for new wells. The technology will also help reduce unnecessary costs on misplaced probes and boost recovery.
In 2012, Statoil increased its recovery rate off Norway to 50% from 49%. The company intends to raise it further to 60% versus the current world average of 35%. The additional increase of recovery rate by 1% can yield an amount of about NOK 200 billion at current oil prices. This amount is equal to the yield from a small oil find.
Statoil, which recently contracted Schlumberger Limited (SLB - Free Report) for electric wireline logging services on the NCS, holds a Zacks #4 Rank (short-term Sell rating). Longer term, we maintain our Neutral recommendation.