Maersk Oil postpones giant gas field in the Norwegian Sea

The partners behind the Zidane gas field in the Norwegian Sea have decided to re-evaluate the financing for the giant field. Maersk Oil, which holds a 20 percent stake, is once again faced with a delayed Norwegian field.
Photo: Maersk
Photo: Maersk

First it was the financing of the massive Johan Sverdrup oil field, which was shelved and deemed fit for an additional evaluation. And now the same thing has happened to another field in the Norwegian Sea where Maersk Oil is a partner. This time the move concerns the giant Zidane gas field - which contains an estimated 17 billion cubic meters of gas - where operator RWE and the three partners now deem it necessary to re-evaluate the finances.

The Norwegian subsidiary of German RWE (RWE Dea Norge) owns the biggest stake with 40 percent of Zidane, followed by the three partners, OMV (Norway, with 20 percent), Maersk Oil Norway (20 percent) and Edison International Norway Branch, also with 20 percent.

Great expectations

Expectations for Zidane are colossal, from the companies as well as the Norwegian economy in general. And the decision to re-evaluate the project did lead to instant layoffs among the Norwegian subcontractors to the country's offshore industry, including 175 employees being axed at Aker Solution.

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ShippingWatch has asked Maersk Oil - one of the Maersk Group companies featured on the agenda for tomorrow's Capital Markets Day - for a comment on the decision, including what consequences the move could have on Maersk Oil's overall financial targets and when the partners expect to make a decision about developments going forward. Maersk Oil's only comment on the matter is as follows:

"Maersk Oil agrees with operator RWE's decision to not submit a development plan for the field, and that further asset evaluation is necessary in order to ensure that the project is robust."

Increased efficiency

More specifically, this is a matter of the project being too expensive, and the partners will now sit down and try to find a way to improve the financing. Hugo Sandal, CEO of RWE Dea Norge, recently told Norwegian publication Teknisk Ugeblad that:

"We have to see whether it's possible to optimize the project. We need to reduce the costs and make the project completion plan more efficient."

The Zidane project thus becomes the latest in a long line of energy projects - in the North Sea and elsewhere - to be hit by the growing costs related to oil and gas extraction. Furthermore, companies such as Statoil are looking to increase their returns to shareholders. Statoil is operator on Johan Sverdrup. Earlier this year, the development plans for Johan Sverdrup were pushed to early 2015.

The expansion and operating plans for the Zidane project were scheduled for submission this October.

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