NORTH Sea focused Faroe Petroleum has said a big development project remains economically attractive as oil prices came under renewed pressure.
Brent crude traded at a seven month low of $45.53 per barrel yesterday amid concerns cuts in production by Opec countries since January have not gone deep enough to rebalance the market.
Growth in production in shale areas of the USA has offset the cuts agreed by Opec. These were extended in May until March next year.
However, Aberdeen-based Faroe highlighted the fact that Norwegian giant Statoil appears keen to press on with a NOK 20 billion (£1.8bn) development that the firms are working on in the North Sea.
Statoil announced on Tuesday that the authorities in Norway have approved the company’s plans for a project that will involve revamping the facilities used on the Nord field off the country and bringing the Bauge field onstream.
The work is expected to allow the firms to recover an extra 250 million barrels. It will help keep the Nord and the neighbouring Hyme field in production for another 20 years.
Faroe has stakes in the three fields and in others it hopes to develop that could be tied in to the Nord facilities.
Chief executive Graham Stewart said: “The economics of this project remain very attractive and will make a significant contribution towards Faroe's planned production and cash flow growth.”
Developments on Nord will be studied with interest in the UK. The official drive to boost recovery of the area’s reserves has faced headwinds amid the downturn that set in after the crude price plunged started in 2014.
Sentiment has improved in the area in recent months following the partial recovery in crude prices that followed the decision by Opec members to cut production. This took effect in January.
Brent fetched more than $56/bbl in April, compared with $27/bbl in January last year.
However, it has fallen by around 20 per cent in recent weeks, following a big rise in the rig count in the USA and increased production in Libya and Nigeria.
Brent recovered some ground later yesterday after news that there had been a bigger than expected fall in US oil inventories last week.
It sold for $115/bbl in 2014, until growth in supplies started to run well ahead of demand.
Mr Stewart has said Faroe can make plenty of money in the North Sea in a low oil price environment. The cost of services has fallen sharply following cuts in activity by other firms.
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