Det norsk submit PDO for North Sea Frøy
Det norske hopes to produce at least 50 million barrels of oil from Frøy over a six-year period.The Frøy license was awarded in the APA 2005 licensing round with Det norske as operator, and Premier Oil Norge as license partner. Both parties hold a 50% interest. Since the award, considerable efforts have been invested in the development of the Frøy Field.
Frøy was previously produced in the 1995 - 2001 period with Elf as operator. The recovery rate was less than half of what was initially planned. A combination of low oil prices and challenges related to the reservoir caused the field to be shut down earlier than planned. Frøy will be developed with a jack-up platform containing drilling and production facilities. Oil will be stored in a tank located on the seabed prior to offloading to shuttle tankers for transport to the market. The produced gas, together with water, will be injected into the reservoir as pressure support, thus enhancing recovery. The production facility is planned leased for this purpose for a minimum production period of six years. The plateau of production is calculated at 5,000 standard cubic meters of oil per day, with eight oil producers.
The Frøy Field is expected to generate a net present value amounting to NOK 5 billion before taxes, provided a cost of capital of 7% before taxes and oil prices based on the market's forward curve. With Det norske's 50% license interest, this will provide the company with a significant cash flow for further investments in exploration and development projects on the Norwegian Shelf. On a license basis, expected investments for development and operation of the Frøy Field amount to NOK 3 billion (fixed terms) in the 2008 - 2014 period, assuming a leased production facility. The predominant share of investments will be disbursed during the second half of this period. The Frøy Field is located in an area containing several smaller oil discoveries that have not been decided developed. In addition, there is promising exploration potential in the area, and more exploration wells will be drilled in adjacent licenses over the next years. Det norske is the operator of three licenses in this area, and license partner in two more licenses. Det norske aims to develop this area further by utilizing the Frøy platform as a hub in support of such a development. The platform will be accommodated to receive production from other fields. Det norske envisions a production period considerably longer than the initially stipulated six years. If an area solution is to be realized during the lifetime of the Frøy Field, the expected present value exceeds NOK 16 billion before taxes. A contract for development and operation of the Frøy Field will be awarded by the end of September this year. This contract will involve considerable assignments for Norwegian contractors, even though the platform will be constructed abroad. Provided that the PDO is approved before the summer of 2008, the company expects drilling and production to commence during Q3 2012. The license partnership is obliged to submit a PDO this year; otherwise the license has to be relinquished. Premier Oil Norge has as of yet not endorsed the submitted plan.
