Tuesday, May 26, 2009

Natural Gas Opportunities in Asia

By Florence Tan

SINGAPORE (Dow Jones)--StatoilHydro ASA (STO) is seeking opportunities to expand its oil and gas output in the Asia-Pacific region, a company executive said Monday.

The Norwegian energy major, which already has projects in Indonesia and India, is also looking at Australia's North West Shelf, Torgeir Kydland, senior vice president international exploration and production, said at a press briefing.

The offshore North West Shelf is "a place where we can make use of our experience from the North Sea," he added.

Asia has robust energy demand and higher liquified natural gas prices compared with other regions, Kydland said.

In India, its joint venture may start drilling an exploration well by next year, Kydland said. Statoil holds a 10% stake in the Krishna-Godavari Basin's DWN-98/2 gas-rich block led by Oil & Natural Gas Corp. (500312.BY).

Statoil also expects to start exploration drilling in its two blocks in the Makassar Strait in Indonesia in 2011, Kydland said.

In November the company was also shortlisted by PT Pertamina as a potential partner to develop the offshore Natuna D-Alpha gas reserve in Indonesia.

As gas in Natuna has high carbon dioxide content, the project will have to include carbon capture, Kydland said.

However, the company is due to stop oil production at its only field in the South China Sea "in summer" which has an output lower than 10,000-15,000 barrels a day now, he added.

"We will leave the field when production ceases," Kydland said.

Asia won't contribute significantly to Statoil's production target of 2.2 million barrels a day of oil and gas equivalent in 2012 as projects take time to develop and are highly capital intensive, Jon Jacobsen, Statoil's executive vice president of manufacturing and marketing said.

"We have seen costs coming down already. We're working to make it come down further," he said, adding costs have fallen by 5%-20%.

In the oil markets, Statoil will focus on crude, condensates, liquefied petroleum gas and naphtha trade in Asia after it closed its oil products trading desk in Singapore in November last year.

Jacobsen said the company has no "physical position" or access to local supply and oil products trading is "not on our agenda now."

Investment in Asia refineries are also "not high on its priority list" as the region has seen a "tremendous boom" in new projects, he added.

Statoil imports 130,000-150,000 barrels a day of crude into Asia and has access to 16 million barrels of oil storage in Yeosu, South Korea, said Marthe Hoff, Asia-Pacific president of oil trading and supply.

The company has also increased the volume of naphtha it ships from Europe to Asia, she added.

"This is an area which we will expand. Asia is the largest market for naphtha in the world," she said.

-By Florence Tan, Dow Jones Newswires; 65-6415-4067; florence.tan@dowjones.co

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