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Shell may be forced to downgrade reserves again

Reuters

Norway questions potential of Shell’s Ormen Lange

Fri Oct 30, 2009 10:33am GMT

* Gas field may not live up to potential, directorate says

* Shell to publish new reserve estimates in 2011

* Reserve downgrade could mean lower future investments

* Production to hit target by end 2009 as planned

(Recasts, adds comments, details, share prices)

OSLO, Oct 30 (Reuters) – Royal Dutch Shell (RDSa.L) and its partners may be forced to cut their reserve estimates for Norway’s giant Ormen Lange gas field, the Norwegian Oil Directorate said on Friday.

A recently drilled appraisal well discovered gas in a rock formation of “variable quality,” and Shell will spend up to two years interpreting this and other data gathered from the field first discovered in 1997 which began production in 2007.

The aim is to provide “a better resource estimate for the Ormen Lange field,” the Oil Directorate said in a statement.

“It is uncertain whether the original upside potential can be realised,” the statement said.

The Oil Directorate estimated that at the start of 2009, Ormen Lange held remaining gas reserves of 381.6 billion standard cubic metres and 27.4 million standard cubic metres of condensate.

Field operator Shell said it would publish new estimates for Ormen Lange in 2011, but declined to say if it expected to cut reserve forecasts.

“In terms of numbers, there is an uncertainty that we’ll have to live with,” said Shell spokeswoman Kitty Eide.

“Like in any field in production, we will update the estimates as new information becomes available.”

Ormen Lange will complete its two-year launch in late 2009 and hit a production target of 70 million cubic metres per day, Eide said. “The start-up phase has been highly successful.”

Shell is the operator of production licence 209 with a 15 percent interest, with Norway’s StatoilHydro (STL.OL) holding a 40 percent interest, state-owned Petoro 35 percent and ExxonMobil (XOM.N) 10 percent.

Shell shares traded 0.4 percent lower at 0945 GMT, while StatoilHydro shares rose 0.2 percent.

(Reporting by Terje Solsvik; editing by James Jukwey)

REUTERS ARTICLE

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