Sinking feeling for Hydro plans Tie-back to Heimdal looks set to lose out to Marathon's Alvheim
Upstream, August 6
By Knut Evensen
Norsk Hydro's vision of an oil processing hub in the Heimdal area off Norway is about to be given a final knockout blow, with partners in the nearby Klegg discovery appearing to favour a tie-back to Marathon's Alvheim development instead.
"This is the favoured technical solution at the moment," a source said, with reference to Alvheim.
Norsk Hydro's plans received their first major setback earlier this year, when the Alvheim partners decided to develop the field with a floating production, storage and offloading vessel rather than accepting an offer from Hydro to bring the oil back to Heimdal.
Hydro's grand plan of a new processing platform in the vicinity of the existing Heimdal installations was torn to pieces in what many sources said was an aggressive tariff pricing policy by Hydro, led by Eivind Reiten.
However, despite Marathon holding a 46.9% stake in Klegg and being operator of the Alvheim development, Hydro has not entirely given up hope of a subsea tie-back of Klegg to its Heimdal installations. But for Hydro's development organisation, defeat in the Heimdal area would be a bitter pill as it will have little work on its plate once the giant Ormen Lange gas development is completed in 2007.
A processing facility on Heimdal could make other small prospects in the area economically more viable.
For Marathon, however, the decision to tie back Klegg to Alvheim has been welcomed because the US outfit is striving to make the development sufficiently profitable.
Despite a hefty tax credit, close to $300 million, and significant volumes in the range of 200 million to 250 million gross barrels of oil, it has been a tough call to make the development profitable enough for the group.
In addition to Klegg, the Hamsun discovery made earlier this year is being examined as another possible tie-back to Alvheim.
Marathon is now pushing ahead with the development and late last week submitted a development plan to the Norwegian authorities.
The operator said it hoped the government would give the project the green light during fourth quarter.
The Alvheim group recently signed a purchase and sale agreement with Statoil for the multi-purpose shuttle tanker Odin.
The plan is to convert the vessel into an FPSO and to produce the field from five drill centres. The vessel will be capable of storing 560,000 barrels of oil after modifications, with oil transported by shuttle tanker. Gas will be piped to the UK via existing infrastructure.
"Since establishing Norway as a new core area in 2002, Marathon has implemented a robust exploration programme resulting in four discoveries out of five wells drilled," Marathon senior vice president Steven Hinchman said. "This successful exploration programme has set the stage for Marathon and our partners to commercialise Alvheim, one of the largest undeveloped oi fields on the Norwegian continental shelf."
Production from a combined Alvheim/Klegg development is expected to ramp up to more than 50,000 net barrels per day during 2007.
Operator Marathon holds a 65% stake in the Alvheim field. ConocoPhillips holds a 20% working interest and Lundin, the remaining 15%.
Norsk Hydro holds a 28% operating stake in the Klegg discovery, where it is partnered by Marathon (46.9%) and Total (24.2%). |
