Norwegian state oil company
) has extended its exploration agreement with its partner Centrica
Plc until June 2013. Statoil's deal with the UK utility firm
includes joint exploration of gas resources in the British and
With the backdrop of uncertainty regarding renewable subsidies
and uncertainty regarding the future of low-carbon power generation
in the UK, the contract extension comes as a big help in enhancing
activity and restoring the deteriorating North Sea yield.
Originally signed in November 2011, the £13 billion 10-year
memorandum of Understanding resulted in the companies bidding
jointly for land to explore in UK's 27th North Sea licensing round.
The extension agreement was also signed at an energy summit called
by the Prime Minister's of the two countries.
The deal is expected to augment oil and gas deliveries from
Norway to Britain and at the same time, promote joint exploration
operations in the North Sea and Arctic waters.
In Europe, Norway is the second largest gas supplier after
Russia, and thus fulfills over a third of UK's gas requirements.
The two dedicated subsea pipelines as well as the yield from its
Snoehvit production plant in the Barents Sea help in the steady
delivery of liquefied natural gas to the UK, Europe, North America
The UK is struggling to meet its domestic gas needs, with
declining yield from old North Sea fields and an increasingly rigid
taxation regime on oil and gas profits, pushing investors out of
the region. This has compelled the UK to depend on imports.
Despite these hurdles, Britain's energy security policy is
centered on bringing back investments into the North Sea and
marketing the remaining billions of barrels of oil and gas in
offshore reservoirs. Thus, Statoil is advantageously positioned to
benefit from these incentives.
Statoil holds a Zacks #3 Rank, which is equivalent to a Hold
rating for a period of one to three months. Longer term, we
maintain our Neutral recommendation on the stock. The company faces
ENI SPA-ADR (E): Free Stock Analysis Report
STATOIL ASA-ADR (STO): Free Stock Analysis
To read this article on Zacks.com click here.