Statoil ASA (NYSE:STO) has recently made a gas discovery in the Iskrystall field in the Barents Sea. The field is operated by Statoil with a 50 percent share in joint venture with Eni Norge AS (30 percent share) and Petoro AS (20 percent).
“Well 7219/8-2, drilled by the drilling rig West Hercules, has proved an approximately 200 metre gas column. After completion of Iskrystall, the West Hercules rig will move back to the production license 532 to drill the Skavl prospect. Skavl is situated approximately 5 km south of the Skrugard discovery (now part of Johan Castberg),” reports Statoil ASA (NYSE:STO).
Iskrystall is one of the four prospects in Johan Castbern area
The block PL608 in the Havis area has earlier seen an oil discovery in 2012 proving 400 to 600 million barrels of recoverable oil reserves. Iskrystall is one of the four prospects in Johan Castbern area that were planned to be drilled between December 2012 and summer 2013. Statoil estimates the reserve volumes in Iskrystall to be between 6 and 25 million barrels of oil equivalents (boe).
Figure 1: Location of Iskrystall
Statoil is disappointed with the results of this discovery
However the primary purpose of Iskrystall drilling was to find oil rather than gas. Hence, Statoil is disappointed with the results of this discovery. Oil production has proven to be a more lucrative business rather than gas production which requires expensive infrastructure.
“Our main goal was to find oil in Iskrystall, but unfortunately it did not materialize. We still believe we can prove more oil resources in the Johan Castberg area and will continue our exploration effort with two more wells in the Skavl and Kramsnø prospects,” says Gro G. Haatvedt, senior vice president of exploration Norway.
Statoil ASA (NYSE:STO) says: “A comprehensive data acquisition program was performed in the Iskrystall well including coring, wire line logging and fluid sampling. This gives valuable geological information about the Johan Castberg area. Statoil ASA (NYSE:STO) and the partners in the Johan Castberg project in the Barents Sea decided in June 2013 to delay the investment decision for the project to further mature the resource base and field development plans for the project. In addition there are uncertainties in the tax frame work for the project. It is necessary to conclude the remaining exploration wells and ongoing work on field development plans, until the partners are ready to make an investment decision for the project.”
Since the announcement of this discovery this morning, the price of Statoil ASA (NYSE:STO) dropped Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) 0.8 on the Oslo market. This signifies the market sentiment towards this discovery is not that positive and that Statoil ASA (NYSE:STO) may not be able to reap significant benefits from this area in the future.