Statoil said that, as a result of the reduced production, which is down from the original outlook of 1.3 million barrels of oil equivalent (boe) a day, production costs per boe will increase to above NOK30 per barrel/bbl for 2007.

The Norwegian company added that the original target was based on successful deliveries from a number of technically demanding fields, in particular the two high temperature/high pressure fields Kristin and Kvitebjorn.

However, production on the Kvitebjorn field was temporarily shut down on May 1, 2007 to allow for the drilling of two further production wells, and is not expected to resume until Q4 2007. In addition, the stepping up of production on the Kristin field will be further delayed, Statoil said. Plateau production is now expected to be reached towards the end of the Q3 2007.

Statoil also revealed that production from the Volve project has been delayed until Q3 2007 and that production build-up on its partner operated Shah Deniz gas field in Azerbaijan has been slower than anticipated due to technical problems with the production wells.

Statoil did reveal that the shortfall has to some extent been counteracted by increased gas production and export from other fields, but added that market conditions and customer off-take would limit the extent to which such compensatory measures could be fully utilized.

Nevertheless, Statoil said that the measures to improve the company"s drilling performance that were put in place in late 2006 are paying off. The company said that drilling of new production wells in the Tampen area has improved so far in 2007.

PIN/BUSINESS-REVIEW.Com