Wintershall doubling gas output at North Sea field, books Achimgaz project reserves
KASSEL. March 15 (Interfax) - Wintershall is doubling output at the Wingate project in the North Sea, in which it is partnered by Russia's Gazprom .
"In October 2011 the company started its first own-operated natural gas production platform in the southern British North Sea with the Wingate platform. The basic production is 1.5 million cubic meters of natural gas per day initially. The company aims to double the production rate to three million cubic meters of natural gas per day with a second well. This would be enough to supply around 400,000 households with gas. With its investments of more than 50 million euros in the Wingate project, Wintershall is sending a clear signal about its commitment to the future of exploration in the southern North Sea. With an annual production of around one billion cubic meters, Wintershall is one of the largest natural gas producers in this region," Wintershall said in materials.
Wintershall resumed production at the C96 and C97 oil concessions which it co-owns with Gazprom in Libya in September. The company said on March 15 that it was producing 60,000 barrels of oil a day in Libya by the end of last year. Before suspending its operations, Wintershall was producing around 100,000 barrels of oil a day in Libya.
Wintershall is Gazprom's partner in the South Stream and Nord Stream gas pipeline projects, with stakes of 15% and 15.5%, respectively; and in the Yuzhno-Russkoye, Achimgaz and Volgodeminoil projects.
The German company said it laid the foundations for further growth in Russia last year. A framework agreement was signed with Gazprom with the intention to develop two further blocks of the Achimov formation in the Urengoy gas field in west Siberia together. According to the agreement, Wintershall will initially receive a 25 percent share in blocks IV and V, with the option of increasing to 50 percent at a later date. The memorandum also states that Gazprom will receive shareholdings of equal value in Wintershall exploration and production projects in the North Sea in return. Wintershall Board Chairman Rainer Seele told reporters on March 15 that the deal should be closed by the end of this year.
Commercial development for the reservoir 1A in the formation, from which the joint venture Achimgaz (50% Gazprom/50% Wintershall) has been producing since 2008, began last year. "We are currently producing more than 1 billion cubic meters a year from six pilot wells there. In the medium term we want to increase production to an annual level of 8 billion cubic meters," the company said.
Wintershall said its confirmed oil and gas reserves increased on the figure at the end of 2010 by three percent to 1,156 million BOE. "This rise is mainly due to the volumes from the Achimgaz project being included for the first time, where the commercial development of the field began following the successful conclusion of the pilot phase," the company said.
Mario Mehren, Wintershall executive responsible for Russia, told reporters Gazprom decided abandon the pilot phase for commercial development on November 18 so that the reserves could be booked.
He said Russian laws banned licenses from being split by horizons. "We'd be glad to have the opportunity - it would greatly simplify the terms for carrying projects out and financing them," Mehren said.
The six wells had overall capacity for 3 million cubic meters per day at the pilot phase. Another 20 wells will be drilled for phase one of full commercial development.
Wintershall is involved in the project on service contract terms: the Achimgaz JV provides license-holder LLC Gazprom Dobycha Urengoi with production services. This arrangement was chosen because Russian law does not allow licenses to be split. However Wintershall has never concealed the fact that it wanted access to a subsurface resource license that enabled it to put reserves on its balance sheet.
Wintershall said on March 15 that the overall gas sales of all three of its trading joint ventures operated with Gazprom (WINGAS, WIEH and WIEE) rose by one percent on the previous year to 417 billion kilowatt hours, despite the overall decline in the German gas market. EBIT from Wintershall's natural gas activities rose from EUR416 million euros in 2010 to EUR425 million euros last year. Wintershall said it wanted to increase the natural gas trading sales volume in 2012 too, despite the continued intense competitive pressure. However, owing to the continuing pressure on margins, the company anticipates a decline in earnings despite significantly higher sales.
Wintershall boosted net profit 15% last year to, for the first time ever, more than EUR1 billion. Revenue grew 12% to EUR12.1 billion but EBIT fell 10% to EUR2.1 billion owing to the lower contribution by Libya.
The company reduced combined oil and gas production 15% to 113 million boe, however gas production alone was flat at 88 million boe.