Offshore staff
(Brazil)-Norsk Hydro ASA will acquire all shares held by a subsidiary of the EnCana Corporation for a discovery in the Chinook field, offshore Brazil. Hydro will pay the EnCana subsidiary $350 million on a debt-free basis for the Campos basin discovery.
The Chinook development is located 75 km off the coast of Brazil in water depths of 100 m. The field is expected to contain up to 2 Bbbl of heavy oil, based on appraisals of four wells.
While heavy oil development in similar fields has been slow and technically challenging, Hydro will employ technologies such as long-reaching horizontal wells and sophisticated reservoir management techniques to reduce development costs and improve overall project economics.
The transaction is expected to close in 1Q 2006, pending regulatory approval. Once complete, Norsk Hydro will have a 50% stake in the discovery, partnered with US independent Kerr McGee. The two companies are currently working on a development plan for Chinook to get production started as soon as is practical.
Production for the field is expected to reach beyond 2025, at an estimated operating cost of $2/bbl. Development costs are currently estimated at $5/bbl.
The purchase fits well within Hydro's growth strategy of acquiring undeveloped but proven resources with clearly identified potential. Hydro Executive VP and Head of Oil & Energy Tore Torvund said that the Chinook asset "represents a unique opportunity to secure long-term resources with significant upside potential in a region with considerable proven oil resources and exploration potential."
He went on to say that "the acquisition marks another important step in expanding Hydro's international oil and energy business and will allow us to leverage key Hydro competencies."
11/22/2005
