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Shell’s Natural-Gas Find Off Norway Disappoints

Bloomberg

Shell’s Gro Natural-Gas Find Off Norway Seen at Lower Range of Estimates

By Fred Pals and Marianne Stigset – Aug 27, 2010 11:07 AM

Royal Dutch Shell Plc’s deepwater appraisal well at the Gro natural-gas discovery indicated the find may be at the lower end of estimates, potentially denting plans for a new production hub in the Norwegian Sea.

“The reservoir quality is poorer than expected,” the Norwegian Petroleum Directorate said today in a statement. “Preliminary estimates place the size of the discovery in the lower range of the original resource estimates.”

The find at a depth of 1,300 meters (4,300 feet) was estimated to hold 10 billion to 100 billion cubic meters of gas. Norway, the world’s second-biggest gas exporter, is seeking to develop a center for production in the Norwegian Sea that also includes finds by Statoil ASA and Total SA. The country is seeking to raise gas production as North Sea oil fields are depleted after 40 years of production.

“It’s too early to say how this will affect interest in the area but of course any negative drilling result is a disappointment,” Gisle Johanson, a spokesman at Statoil, which owns 40 percent of the Gro license, said by phone. “But at the same time we need to spend more time on this well and maintain the long-term goals and plans that we have. We don’t turn off the lights because of one well.”

Kim Blomley, a Shell spokesman in London, said the result of the appraisal well was “within the predicted range of uncertainty.” He declined to comment further.

Rig Moves

The appraisal well, started in May, was drilled by the Aker Barents rig to a depth 3,675 meters. Additional studies will be needed to clarify the size of the discovery, the agency said. The rig will move to Shell’s Dalsnuten prospect in the same area, the directorate said.

A dry appraisal well at the Gro discovery would be a blow to efforts to develop a hub for gas production, Bente Nyland, head of the directorate, said in an interview on Aug. 25. “Gro and Dalsnuten are the biggest prospects, so if the results there aren’t positive, interest is likely to fall.”

The well is part of license 326, which is 50 percent owned by Shell, 40 percent by Statoil and 10 percent by GDF Suez SA.

Johanson said that Statoil’s work with its Luva prospect in the area will continue. “We’ve demonstrated sufficient resources at Luva to study the options to establish a gas treatment facility in connection with Luva and a transport solution from the area,” he said.

To contact the reporters on this story: Meera Bhatia at [email protected] Fred Pals at [email protected]

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