North Sea Finds Linked in ‘Giant’ Oil Discovery

Statoil ASA (STL), Norway’s biggest oil and gas producer, said two North Sea finds are probably part of a single field that could be the country’s largest oil discovery since the 1980s.

The Aldous and Avaldsnes oil discoveries located on the Utsira High may make up a combined structure of 500 million to 1.2 billion barrels of recoverable oil, the Stavanger-based company said in an e-mailed statement today.

“Aldous-Avaldsnes is a giant oil discovery,” Tim Dodson, Statoil’s executive vice president for exploration, said in the statement. “Norway has not seen a similar oil discovery since the mid-eighties.”

Norway has faced dwindling output at maturing North Sea fields and smaller new finds. Production peaked in 2000 and is forecast to drop 6 percent this year to about 1.7 million barrels a day, according to the Norwegian Petroleum Directorate. Statoil, which operates 80 percent of Norway’s oil and gas production, missed its 2010 output target and may produce less this year than last.

Statoil rose as much as 1.2 percent to 124.1 kroner and traded at 123.2 kroner as of 11:35 a.m. in Oslo. Det Norske Oljeselskap ASA (DETNOR) soared as much as 30 percent to 41.3 kroner, the highest in intraday trading since October 2008. Lundin Petroleum AB (LUPE) climbed as much as 9 percent in Stockholm to 87 kronor.

‘Huge’ Discovery

The Aldous-Avaldsnes discovery will add at least 4 to 5 kroner to the value of each Statoil share, Magnus Smistad, an analyst Fondsfinans ASA, said by telephone today. “We’re talking unrisked valuation of probably something around $2.7 billion to $2.8 billion,” he said, based on capital expenditure of $5 billion. The discovery “is a huge one.”

Statoil on Aug. 8 said its 16/2-8 well made a “high- impact” oil find at the Aldous Major South prospect, estimated at 200 million to 400 million barrels of oil equivalent, with “additional upside” potential both north and south of the find. The license is located west of Lundin’s Avaldsnes find.

The 16/2-8 well established common oil and water contact between the Aldous and Avaldsnes structures, Statoil said today. Between 200 million and 400 million barrels of resources have been discovered at the Aldous Major South Well, with strong indications from well data of another 200 to 400 million barrels of recoverable oil equivalent in the same structure. A resource base of 100 million to 400 million barrels is estimated in the Avaldsnes structure.

High-Impact Finds

The Aldous well was drilled by the Transocean Leader rig, which will next drill the Aldous Major North well to further appraise the area’s potential and examine communication with Aldous-Avaldsnes. The partners in license 265, where Aldous is located, plan more appraisal drilling next year, Statoil said.

This is Statoil’s third so-called high-impact find, defined as a discovery that holds more than 250 million barrels of oil equivalent, this year.

Statoil’s partners in license 265 include Petoro AS with 30 percent, Det Norske Oljeselskap with 20 percent and Lundin with 10 percent.

Avaldsnes is located in license 501 and is operated by Lundin, which holds a 40 percent stake, while Statoil has 40 percent and Maersk Oil has 20 percent.

Bloomberg