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Dry Hole at Shell’s Gro Prospect Would Hinder Gas-Hub Efforts, Norway Says

Bloomberg

By Marianne Stigset – Aug 25, 2010 4:01 PM GMT+0100

A dry appraisal well at Royal Dutch Shell Plc’s Gro discovery in the Norwegian Sea would be a blow to efforts to develop a hub for natural gas production, the country’s Petroleum Directorate said.

Newspaper Upstream reported today that a Shell appraisal well at Gro was “virtually dry,” citing an unidentified person in the industry. The result means the volume estimate of 10 billion to 100 billion cubic meters of gas is expected to remain unchanged, Upstream said.

The directorate hasn’t received the results from the well, spokeswoman Eldbjoerg Vaage Melberg said in Stavanger, Norway. Angela Cleveland, Shell’s commercial director for upstream, today declined to comment when asked at a conference in the same town on the country’s west coast.

“It’s the quality of the reservoir that is the big question,” Bente Nyland, head of the directorate, said today in an interview in Stavanger during the conference. “Gro and Dalsnuten are the biggest prospects, so if the results there aren’t positive, interest is likely to fall.”

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 discovered oil more than 40 years ago and is seeking to raise gas production as North Sea oil fields are depleted.

Deepwater Well

The appraisal well at Gro started in May at a depth of 1,300 meters (4,300 feet), according to the directorate. Shell also operates Dalsnuten in the same area, which will be drilled afterwards, the agency said in July.

Norway hasn’t had a major gas discovery since Ormen Lange in 1997 and has pinned its hopes that the Gro would be major find. Nyland said it was a “medium-sized discovery” when estimates for the field were announced in June last year.

Ormen Lange, operated by Shell, has recoverable reserves of 301 billion cubic meters, according to the directorate. That’s equal to about three years of Norway’s annual output.

“Statoil is working on developing the discoveries on deepwater that have been made there,” Nyland said. “So once you have an infrastructure in place, it would be interesting to add new resources to that infrastructure and then smaller finds would rapidly be interesting.”

Statoil’s Chief Executive Officer Helge Lund said today in an interview that more wells are needed to determine the interest of the area. Statoil holds a 40 percent stake in Gro.

“Interest in this area will not be decided by one well but with knowledge one acquires through several wells, seismic and other work,” Lund said. “But of course it’s better to make large discoveries than to drill disappointing wells.”

To contact the reporter on this story: Marianne Stigset at [email protected]

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