Chevron Corp. said its decision Monday to go ahead with the development of the Alder natural gas field in the British sector of the North Sea builds on an already strong foundation in the area. While regionally, the sector is in decline, there are few reasons to write it off completely.
Chevron said the Alder field in the British waters of the North Sea has a planned capacity of 100 million cubic feet of natural gas per day. George Kirkland, the company's vice president, said the investment decision builds on a strong foundation established in the region.
"For more than 50 years Chevron has been active in the U.K.’s oil and gas industry, and we will continue to play a role in developing the region’s natural resources," he said in a statement.
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First gas is expected from the field by 2016. Discovered in 1975, the company said it was finally ready to develop Alder because of new technologies used to manage the high-temperature gas field.
Oil & Gas U.K., the industry's lobby group, praised a November decision from British exploration company EnQuest to invest in the $6.5 billion Kraken heavy oil field in the North Sea. Expected to produce as much as 30,000 barrels of oil equivalent per day when it comes on stream in 2016, Oil & Gas U.K. operations director Oonagh Werngren said Kraken was "yet another clear sign that opportunity remains in the North Sea."
North Sea momentum in 2014 was established earlier this month when French energy company GDF Suez announced it became a "fully-fledged" North Sea producer when first gas was produced from the Juliet field. With a production plateau of 80 million cubic feet per year, GDF Suez said the breakthrough at Juliet means its staying in the North Sea for the long haul.
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Last year was not so good for the North Sea, however. Norwegian energy company Statoil and Royal Dutch Shell said they were putting development of the $7 billion Bressay heavy oil field on the shelf because of poor economics. Chevron, meanwhile, was upbeat about Alder but said it wasn't sure yet what to do with its Rosebank field in the North Sea because of high costs associated with development.
A report from energy consultancy Wood Mackenzie said 2014 should be a prime year for the North Sea but the optimism should fade within a year. Wood Mac's Lindsay Wexelstein said there are lingering concerns over the horizon for the British North Sea but those very same reservations were expressed for recent oil production gains from the United States. Scottish independence may also cut into U.K. energy expectations but diversity is central to the success of any energy sector, no matter where it is. Chevron's bet on Alder comes nearly 40 years after the field was discovered. Onshore, Total announced Monday it is the first supermajor to invest in Britain's emerging shale potential. Much can be said about emerging technologies for both developments and while the region as a whole may be down, it's in no way out of the game completely.
By. Daniel J. Graeber of Oilprice.com