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News on Shell Ormen Lange reserves undoubtedly negative

The Wall Street Journal

Ormen Lange Well Indicates Resource Less Than Hoped

LONDON (Dow Jones)–The Norwegian Petroleum Directorate Friday said a new well drilled at Ormen Lange indicates the gas field’s resources could be lower than previously hoped.

“The result of this appraisal will be incorporated into a major interpretation task aimed at providing a better resource estimate for the Ormen Lange field. It is uncertain whether the original upside potential can be realized,” the NPD said.

Shell spokeswoman Kitty Eide Friday said there will be no “specific numbers until we have concluded assessments.” The company expects to come back to the market with an update on resources in 2011, Eide said. She could not comment on how the latest data could impact the field’s production profile, saying “we don’t give statements on volumes.”

The NPD said “parts” of the future field development and production profile may be affected by the new estimate.

Ormen Lange is developed with three subsea templates, two of which are in the middle of the field, and one in the south. Data from the new well, drilled six kilometers northeast of the field’s main production area, aimed to check out Ormen Lange’s northern reach.

The disappointing findings could affect Shell’s plan to locate a fourth template in that portion of the field and imply that the production profile could tail off quicker than anticipated, although Shell would not confirm this.

Eide said production drilling will continue as planned throughout the assessment of the field’s reserves, and reiterated Shell’s plan to ramp Ormen Lange up to its nameplate capacity by the end of this year when it’s set to reach flow of 70 million cubic meters a day.

Analysts at investment company Collins Stuart said in a note that the Ormen Lange news is “highly unlikely” to have an impact on reserves because of the conservative way companies book reserves.

“While the news is undoubtedly negative…the relative impact on broader commercial resource at the companies looks likely to be limited.”

Ormen Lange gas is processed at onshore plant Nyhamna and shipped on to market.

There have been a number of resource downgrades compared with earlier expectations from the NPD in recent months, including at fields Victoria, Peon and Agat.

One industry watcher said: “All these fields have been challenging from the outset regarding their production characteristics, there have been questions about whether the oil and gas is producible, moveable.”

“You need production testing to be able to get your answer on how big they are. The (initial) ranges are typically quite large,” he said.

Royal Dutch Shell (RDSA) operates Ormen Lange, holding a 17.04% stake. DONG owns 10.34%, Exxon Mobil (XOM) has 7.23%, Petoro has 36.48% and Statoil has the remainder.

NPD Web site:

-By Elizabeth Adams, Dow Jones Newswires; +44 (0) 20 7842 9386;


RELATED ARTICLE Shell completes Ormen Lange delineation

Published: Oct 30, 2009

Offshore staff

STAVANGER, Norway — Norske Shell, operator of the Ormen Lange field, has completed drilling appraisal well 6305/5-3 S in production license 209 in the North Sea.

The objective was to delineate the northern extent of the field. The well encountered reservoir rocks of variable quality in the Egga reservoir unit and the Jorsalfare formation, the company reports. Gas encountered in Egga confirms pressure communication with the gas-producing area. Preliminary evaluations show gas/water contact in the Egga. The gas/water was encountered at a shallower level than in the main part of the field. The well was not formation-tested, but extensive data acquisition and sampling was done.

The appraisal well results will be incorporated into a major re-interpretation of the field aimed at a better resource estimate, the company says. Parts of the field’s future development and long-term production profile may be affected by the new estimate, the company says.

The semisubmersible Leiv Eiriksson drilled the well to a vertical depth of 2,815 m (9,235 ft) below sea level. The well was terminated in the Kyrre formation in the Upper Cretaceous. The well has been temporarily abandoned.

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