Det norske oljeselskap has submitted a Plan for Development and Operation (PDO) for the Frøy Field today. This is the first time the company has submitted a PDO as operator.
Det norske hopes to produce at least 50 million barrels of oil from Frøy over a six-year period. With an oil price of USD 100 per barrel, this equals a gross value in excess of NOK 25 billion.
On 31 March, CEO Erik Haugane submitted the plan to the Ministry of Petroleum and Energy.
"This is our first Plan for Development and Operation (PDO) as operator. This event constitutes a significant milestone in the history of the company."
The Frøy license was awarded in the APA 2005 licensing round with Det norske as operator, and Premier Oil Norge as license partner. 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.
VP Technology & Development Stein Fines states that the process of identifying an optimal development solution for the Frøy Field has been challenging.
"We have gained knowledge from the difficulties previously encountered by Elf, and are of the opinion that we have established a very robust development solution."
Area Development
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 field will be produced with eight wells. A drilling unit on the platform renders it possible to maintain an active development program throughout the field's lifetime. The plateau of production is calculated at 5,000 standard cubic meters (32,000 barrels) of oil per day. The production facility is assumed leased from an oil service company. The production is expected to generate a net present value of NOK 5 billion before taxes, assuming a cost of capital of 7% before taxes and oil prices based on the market's forward curve. This will ensure a solid cash flow to Det norske's further investments in exploration and development 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 field will be operated from Trondheim with base functions located in Stavanger.
The Frøy Field is located in the vicinity of the Heimdal Field, 150 km west of Haugesund. This is 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. According to plan, drilling and production is scheduled 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.