Lundin broadside on Brynhild

 

The boss of Lundin Petroleum has warned that start-up of its delayed Brynhild field off Norway is likely to slip further into the fourth quarter, blaming tardy work by Shell and Bluewater to upgrade the Pierce field’s floating production unit in the UK.

The topsides of the Bluewater-owned Haewene Brim floating production, storage and offloading vessel, which is leased to Shell for its Pierce field, are currently being modified to receive oil output from Brynhild but work at the Nigg yard in Scotland has been running several months behind schedule.

Brynhild was originally due on stream in late 2013 but Swedish operator Lundin said previously the stalled vessel modification work had pushed expected start-up back to the second quarter of this year.

Chief executive Ashley Heppenstall used the company’s results presentation on Wednesday to deliver stinging criticism of "low productivity" by Shell and the Dutch contractor, warning that a revised first oil date for Brynhild of September was now in jeopardy and criticising the pair for failing to meet their own work schedule.

“The delay to Brynhild first production has been a direct result of the inability of Shell and Bluewater to complete the FPSO-related workscope on schedule to ensure the vessel is ready to recommence Pierce production and accept Brynhild oil,” he stated in the first-half results report.

Heppenstall added that “based upon historically low levels of productivity and continued workscope changes, I have low confidence in the Shell/Bluewater schedule and realistically expect first oil to slip into the fourth quarter”.

He told a conference call the floater delay had been “a very frustrating process for Lundin”, given the subsea element of Brynhild is now complete and development wells are ready to start producing.

However, he added he does not see further slippage into next year for the subsea tie-back project and believes gross initial production rates at Brynhild could exceed the targeted 12,000 barrels of oil equivalent per day.

He underlined he does not see any impact from the delayed start-up of Brynhild on three other projects – Edvard Grieg and Boyla off Norway, and Bertam off Malaysia – that are due on stream next year.

Lundin aims to roughly double its average production to 50,000 boepd in 2015 after the four development projects are brought on stream - up from between 24,000 and 29,000 boepd expected this year - and expects to exit next year with output of 75,000 boepd.

Its production is set to take a further leap with scheduled start-up of the giant Johan Sverdrup field off Norway in late 2019.

Analysts forecast Lundin’s net output from the field at 150,000 boepd, out of a gross plateau estimate of 600,000 boepd, based on an expected stake of around 25% once a unitisation agreement is finalised early next year among partners in three licences underpinning the Utsira High behemoth.

Investments under the first phase of the project are targeted at between Nkr100 billion and Nkr120 billion, but Heppenstall said a cost update for the field’s four platforms was expected when the development plan is submitted by working operator Statoil early next year.

He added that a recent softening of drilling rig rates due to lower demand as oil companies cut spending also bodes well for possible cost reductions on the scheme, with rig contracts for development drilling likely to be awarded over the next 12 months.

Meanwhile, Lundin has kicked off a wildcat at its Alta prospect in the Barents Sea off Norway targeting pre-drill resources of 261 million barrels as it targets more resources in the vicinity of its Gohta oil and gas discovery in the Arctic frontier play.

Gohta currently has a gross contingent resource estimate of between 111 million and 232 million barrels of oil equivalent and Lundin has previously stated it would need to prove up reserves of at least 250 million boe to move ahead with a standalone development.

Heppenstall said though a solution to develop infrastructure in the remote Arctic region was necessary to facilitate exploitation of finds.

Gohta could ultimately form part of an area-wide development with Statoil’s Johan Castberg discovery farther west and the Lundin boss said he therefore believed a hub solution with pipeline to shore would be the best long-term solution to develop the latter field, which is the subject of a conceptual re-evaluation.

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