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Shell’s Loss Is Eni’s Gain

Shell’s Loss Is Eni’s Gain

At the beginning of this week, oil major Shell announced that it will indefinitely postpone (read: completely abandon) its Arctic drilling operations in the Chukchi Sea offshore Alaska. The company stated: "Shell will now cease further exploration activity in offshore Alaska for the foreseeable future. This decision reflects both the Burger J well result, the high costs associated with the project and the challenging and unpredictable federal regulatory environment in offshore Alaska."

This retreat will result in Shell losing its $7 billion investment, a bitter pill to swallow for the oil major.

While Shell and many others have given up on their Arctic ambitions, for the time being at least, Italian oil major Eni is closer to producing Arctic oil and gas than ever before.

Meet the Goliat FPSO, a floating production storage and offloading unit developed by Sevan Marine, a Norwegian marine engineering company. The platform has a production capacity of around 100.000 boe per day. Related: Alaska Facing Tough Choices Without Arctic Oil

Image source: FT

The FPSO has –after a long journey from South- Korea- finally arrived at the prolific Goliat field, which contains estimated recoverable reserves of around 178 MMboe; enough to guarantee around 15 years of production. Related: Africa Banking On Nuclear Power

Eni and smaller partner Statoil are determined to start operations in the Barents Sea sooner rather than later. The oil companies acquired the license for the field back in 1997 and the first exploratory well was drilled in 2000. Ever since, the project has seen delay after delay and the total costs have surged from an expected $3.53 billion to nearly $5.5 billion.

However, it looks like Eni and Statoil are perhaps only weeks away from production, as the already drilled wells just need the final approval from the Norwegian Petroleum Safety Authority, which released a report in July on the safety situation of the FPSO and said on September 28 that "There is still some work left to do at Goliat." Related: Russian Crude Output Highest Since Fall Of Soviet Union

Nonetheless, ENI representative Andreas Wulff confirmed to Reuters that the field will still come on stream in 2015, without giving a specific date.

The start of production in the Arctic, together with the recent discovery of the ‘Zohr’ supergiant natural gas field off the Egyptian coast and the successful bids for Mexican offshore fields push the company further in the direction it so dearly wants to be: a major upstream player.

The Goliat field, when it comes on stream will become the world’s northernmost offshore field with an output expected to peak around 34 million boe per year.

By Tom Kool of Oilprice.com

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