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Statoil Commits $7B for Mariner

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Norwegian oil and gas giant Statoil ASA (STO - Free Report) will spend over $7 billion for the development of its Mariner field. This represents the largest offshore development in the U.K. North Sea over the last ten years.

The field with an expected productive life of 30 years is scheduled to be commissioned in 2017. Statoil has projected an average yield of about 55,000 barrels of oil a day over the first three-year plateau period.

Located on the East Shetland Platform of the UK North Sea, about 150 kilometers east of the Shetland Isles, the Mariner Field is operated by Statoil with a stake of 65.11%. Recently, Eni SpA’s (E - Free Report) 28.89% stake in the Mariner field was purchased by Japan’s JX Nippon Oil and Gas Exploration Corp. The remaining 6% is held by Alba Resources Limited, a wholly owned subsidiary of Cairn Energy Plc.

The Maureen Formation and the Heimdal Sandstones of the Lista Formation of the Mariner Field are estimated to contain about 2 billion barrels of oil in place and reserves in excess of 250 million barrels of oil. The yield from these formations is in the range of 12–14 API of heavy oil.

A production, drilling and quarters platform, supported on a steel jacket, consisting of 50 active well slots and a floating storage unit (FSU) with a capacity of 850,000 barrels will be employed for the development of the field. For the initial 4–5 years, a jackup rig will also be engaged.

Dragados Offshore SA has secured the contract for engineering, procurement and construction of the jacket, while Daewoo Shipbuilding & Marine Engineering Co. has been entrusted with the topside contract. The total cost of these contracts is ???1.2 billion ($1.9 billion).

The contracts for the FSU and a tailor-made jackup rig are likely to be awarded in the second quarter of 2013. Contractors will also be asked to tender for risers, pipelines, umbilicals, flowlines, power cables and marine operations in 2012. They will however be awarded in the second quarter of 2013.

In parallel, the Stavanger-based company also holds an 81.6% interest in the Bressay field, North Sea and is expected to make a final investment decision for Bressay in 2013.

Statoil holds a Zacks #3 Rank (short-term Hold rating). Longer term, we maintain our Neutral recommendation.

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