Statoil - Canadian Property Review

By Eric Fox | June 28, 2011 AAA

Statoil (NYSE:STO) is relying partly on the successful development of the company's oil sands projects in Canada to meet its goal of increasing production by 3% annually through 2020. The company is also counting on exploration and development success in various prospects located offshore of eastern Canada.

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Onshore Canada
Statoil had interests in approximately 273,000 acres of land at the Kai Kos Dehseh project in the oil sands in Alberta, and in November of 2010, it announced a 40% interest of the land will be sold. The $2.3 billion transaction was closed early 2011. The company has leases in four separate areas - Corner, Hangingstone, Thornbury and Leismer, and it is using steam-assisted gravity drainage to develop the oil sands.

Statoil recently started up production from the Leismer Demonstration Project on its lease and over the next two years will ramp up to productive capacity of 18,800 barrels per day, once the company receives approval from the regulatory authorities. The ultimate capacity of this area is 40,000 barrels per day.

Statoil has received approval to move forward on the Corner project and expects this area to have peak production capacity of 40,000 barrels per day. The company expects all of the Kai Kos Dehseh leasehold to support total production of 220,000 barrels per day when fully developed.

Offshore Canada
Statoil has interests in two producing fields in the Jeanne d'Arc Basin located off the coast of Newfoundland. The company has a 5% interest in the Hibernia field, which is operated by Exxon Mobil (NYSE:XOM) and first started up production in 1997. The ownership of the field is shared by a number of other oil and gas companies including Chevron (NYSE:CVX), Suncor (NYSE:SU) and Murphy Oil (NYSE:MUR).

The company also has a 15% interest in the Terra Nova field, which started up production in 2002. Terra Nova is also co owned by many of the same oil and gas companies that are involved with Hibernia.

Statoil is involved with two development projects in this basin. The company has a 9.7% interest in the Hebron project, also operated by Exxon Mobil. This development is estimated to have heavy oil recoverable resources between 400 million and 700 million barrels. Statoil expects first oil here by 2017. (Learn more about investing in this area, check out Investing In Oil And Gas UTI's.)

The company also has a 10.5% interest in the Hibernia Southern Extension, which is under development by Exxon Mobil. The company expects this project to have peak production of 50,000 barrel of oil per day, with first oil expected in 2014.

One Statoil-operated discovery is the Mizzen Prospect located in the Flemish Pass basin. The company had a successful discovery well here in 2009 and now holds a Significant Discovery License on this prospect. (Find out how futures can predict energy prices, read Fueling Futures In The Energy Market.)

The Bottom Line
Statoil needs to successfully develop the company's leases in the oil sands of Canada as well as various long-term projects located offshore eastern Canada in order to meet the 3% annual production growth target through 2020.

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