By Kjetil Malkenes Hovland

 

Danish oil company Maersk Oil said Thursday it had chosen KBR London to engineer the technically challenging Culzean gas field in the U.K. North Sea, a $4.7 billion investment set to produce 5% of the country's gas output from 2020 or 2021.

The first gas is expected in 2019 from the high-pressure, high-temperature field, discovered in 2008 in the central part of the U.K. North Sea, said Maersk Oil, the oil and gas unit of Danish conglomerate A.P.Moller-Maersk A/S (MAERSK-B.KO).

"Culzean is a key growth project for Maersk Oil, but can also be an important new resource for the U.K. in terms of its potential to support energy security and employment," said Martin Rune Pedersen, managing director of Maersk Oil U.K.

The field was set to produce between 400 million cubic meters and 500 million cubic meters of gas a day in the plateau phase, and Maersk said its share was equal to 30,000 to 45,000 barrels of oil equivalent per day.

High-pressure, high temperature gas reservoirs are complicated, and require significant pre-investment, according to Maersk Oil. The pressure in the Culzean field is three times that of an ordinary reservoir, and the temperature is 70% hotter than normal at around 170 degrees Celsius.

The field will be developed with a complex of bridge-linked platforms, including a wellhead platform, a processing platform and a living quarters and utilities platform, Maersk Oil said.

The field's profitability was boosted by a U.K. government tax break for high-pressure, high-temperature fields.

"This is an early indication that the new ultra high pressure, high temperature allowance announced at budget will enable substantial investment in the North Sea," said Nicky Morgan, Financial Secretary to the U.K. Treasury.

The final investment decision was set for 2015 and installation was to commence the year after, Maersk Oil said.

Culzean is operated by Maersk Oil, which owns 49.99%. JX Nippon owns 34.01% and BP Plc (BP) owns 16%.

Write to Kjetil Malkenes Hovland at kjetilmalkenes.hovland@wsj.com

(END) Dow Jones Newswires

May 22, 2014 09:15 ET (13:15 GMT)

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