Statoil to Develop Arctic Field Using FPSO - Analyst Blog

Norwegian oil major, Statoil ASA STO has proposed the employment of floating production storage and offloading (FPSO) installation to develop the $15.5 billion Johan Castberg field in the Arctic than through an oil terminal on land.

The development of this flagship Arctic project was postponed last year due to cost inflation and in tax. To make the project economically feasible, the key was to discover additional resources. However, the latest and final round of drilling produced poor results.

In such a scenario, Statoil had two alternatives for the field development. It could either transfer the oil from the field to a terminal on land where tankers would fill up or have an FPSO at the field where vessels would be loaded.  

Having a terminal on land is feasible when large volumes are concerned. However, with the poor drilling results, this option was ruled out. Initially, production from the field was slated to begin in 2019 but the delay has pushed it to 2020.

The daily production is estimated to be 30,000 cubic meters of oil. Statoil, the operator of Johan Castberg, has 50% stake in it. The other stakeholders include Italy's Eni SpA E and Norwegian state-owned firm Petoro, which have holdings 30% and 20%, respectively.

Statoil is a major international integrated oil and gas company. In recent times, the company has delivered strong exploration results and enhanced its resource base by making several high impact discoveries. The latest finds have given the company access to new regions of Norway, Russia, Azerbaijan, Tanzania and Australia. These strengthen the company's position and make way for long-term growth.

At present, Statoil carries a Zacks Rank #3 (Hold). Some better-ranked oil and gas stocks worth considering include Encana Corp ECA and Matrix Service Company MTRX. Both these stocks sport a Zacks Rank #1 (Strong Buy).