Statoil to start Arctic LNG production this week

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MELKOEYA, Norway, Sept 18 (Reuters) The world's first liquefied natural gas plant in the Arctic, part of Statoil's billion Snoehvit project in the Barents Sea, will probably start producing LNG this week, the Norwegian group said on Tuesday.

''We hope to be on stream, with LNG produced to tanks, by the weekend,'' Statoil spokesman Sverre Kojedal said.

The first LNG tanker to take gas from the field, the 290-metre long Arctic Princess, early on Tuesday docked at the plant, located on the Melkoeya Island off Norway's northern tip.

Statoil said it was still unclear whether the first LNG shipment of 145,000 tonnes would go to Spain or the United States -- the main markets for Snoehvit gas.

The timing of the first tanker leaving Melkoeya was also not yet certain due to the complicated start-up process of the liquefying part of the giant onshore plant.

Gas from the Snoehvit field, located 150 kilometres offshore, has been flowing in test production for several weeks, yielding spectacular 100-metre high flames from a flare tower that will normally only be used as a safety valve.

To cut down on emissions and gain fuel for the plant's 230 megawatt power plant, Statoil imported LNG from Egypt for most of the commissioning work at Melkoeya, Kojedal said.

He said that after ramp-up, Snoehvit will produce around 5.7 million standard cubic metres of LNG per year.

Snoehvit's recoverable reserves are seen at 193 billion cubic metres of natural gas, 113 million barrels of condensate and 5.1 million tonnes of natural gas liquids, making it one of the five biggest fields off Norway.

Statoil holds 33.53 percent of the licence and runs the project.

Norwegian state-owned Petoro has 30 percent, France's Total 18.4, Gaz de France 12 percent, U.S. oil company Hess 3.26 percent and Germany's RWE Dea has 2.81 percent.

Statoil, Petoro, Hess and RWE Dea will jointly sell their share of the LNG -- about 4 billion scm per year -- to either the Cove Point terminal in Maryland on the U.S.'s Atlantic coast or to Spain.

The French partners will be responsible for exporting their own share of the LNG.

Snoehvit is also Europe's first LNG export facility and the first offshore development in the hydrocarbon-rich but remote Barents Sea.

''This region will be an oil and gas province of the future,'' said Kojedal, adding that several prospects around Snoehvit -- such as the Goliat or Nucula discoveries -- also showed promise.

Further east in the Russian part of the Barents Sea lies the giant Shtokman gas field, which will require similar technology to Snoehvit to exploit.

Shtokman owner, Kremlin-run Gazprom, has picked Total to help it run a company to develop the field and is reportedly looking for more partners, such as Statoil.

REUTERS DKS BD2125

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