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VNG readies letters of intent for Fenja project

Norwegian unit of German group nears decision on two subsea EPCI contracts for development formerly known as Pil & Bue

GERMANY-based VNG is set to award letters of intent within weeks for a pair of subsea engineering, procurement, construction and installation contracts linked to the subsea development of its 100-million-barrel Fenja oilfield off Norway.

In an interview with Upstream, the head of the German operator's Norwegian business VNG Norge, Atle Sonesen, said front-end engineering and design is now complete and the company is evaluating bids for the next phase of work.

UK-listed Subsea 7 and French giant TechnipFMC are contesting the subsea umbilicals, risers and flowlines (SURF) contract, while the French contractor is also battling it out for the supply of subsea production systems, against Norway's Aker Solutions.

“We expect to decide by the end of this month,” Sonesen said, adding the plan is to award two separate EPCI contracts, but they could also be combined if that turns out to be the best option.

The contracts assume the project partners make a final investment decision by the end of the year and that government approves the plan for development and operation during spring.

VNG is also in the market for a rig to drill six wells with an option for two additional wells in the adjacent Bue discovery.

“We expect the duration of the rig contract to be about a year,” Sonesen said.

The Fenja development consists of two subsea templates and six to eight subsea wells tied back to Statoil’s Njord A platform which is currently undergoing a significant upgrade at Kvaerner’s yard in Stord, Norway.

“We are in close contact with Statoil and progress on Njord A is good,” Sonesen said. Fenja, formerly known as Pil & Bue, is located in production licence PL586 in the Norwegian Sea, and its development is forecast to cost around Nkr 11.5 billion ($1.49 billion). The project will represent the largest exploration and production investment in VNG Norge's history.

Sonesen said the project is going well but he does not under-estimate the large commitment it represents for both VNG and its partners, UK-based Faroe Petroleum and local independent Point Resources.

“We are still working on quality assurance of the business case, but progress is good and we receive positive backing from both VNG Group headquarters in Leipzig and our partners,” he said.

However, there is still one obstacle that could cause problems for the project.

The Fenja licence partners and the Njord licence partners have not been able to agree on tie-in tariffs for third party use of the Njord facilities.

VNG has asked the Ministry of Petroleum to settle the dispute in accordance with the regulations regarding third-party use of facilities that have been in force since 1st January 2006. Sonesen did not want to comment on this issue.

This third-party regulation is intended to achieve efficient use of existing platforms and pipelines in order to ensure a higher level of exploration for and production of oil and gas in Norwegian waters.

The Ministry has recently been asked to settle disputes regarding German operator DEA’s proposed tie-in of the Dvalin field to Statoil's Heidrun facility, German player Wintershall’s tie-in of Maria-to Statoil’s Kristin, Asgard B and Heidrun assets, and Wintershall’s Skarfjell tie-in to Engie’s Gjoa platform.