(Corrects story published on Oct 28 to say that Chevron'sRosebank project has been delayed, not called off, paragraph 29)
* Over 1 bln barrels could stay in the ground
* Arctic Norway, mature British fields most vulnerable
* British, Norwegian oil investments set for sharp falls
* Ongoing UK projects, Sverdrup to go on
By Balazs Koranyi and Gwladys Fouche
OSLO, Oct 28 (Reuters) - Big oil and gas finds in watersalong Europe's northern edge may remain undeveloped now that oilprices have dropped, keeping potential supply of over a billionbarrels of oil equivalent out of the market for the foreseeablefuture.
Discoveries in Arctic Norway could stay dormant, whilemature British fields could face early closure and frontierexploration in areas such as Greenland could be called off asoil companies cut capital spending by up to a fifth.
Projects such as Statoil's $15.5 billion Johan Castberg inthe Barents Sea and smaller finds by Shell, OMV and others were once expected to open new oilprovinces.
They now face delays, cancellations or a radical redesign asoil prices at $85 per barrel make them unprofitable.
Norway, Western Europe's biggest oil and gas producer, isamong the most vulnerable because of its already high costs andits recent push into Arctic waters, not far from the edge of thewinter sea ice, where costs are among the highest in the sector.
"We are looking at each project and the project that is mosteconomically viable," Runi Hansen, Statoil's Arctic chief said."If the Arctic projects are not commercially viable, we are notgoing for it."
If oil prices are significantly lower over the next twoyears, "we believe that about 1 billion barrels of oil and gasresources from the Norwegian continental shelf are now at riskof sanction delays," said Espen Erlingsen, an analyst atOslo-based oil consultancy Rystad Energy.
"This could reduce (Norway's) oil supply potential by about400 thousand barrels per day in 2025 if oil prices stayed at alevel of $80 per barrel," he added. Norway produced 1.46 millionbpd of oil in 2013.
Statoil's Johan Castberg, Norway's biggest Arcticfind with up to 600 million barrels of oil, has already beendelayed by more than a year.
Production from the field would break even at about $80 to$85 per barrel, Nordea Markets estimated, due to its remotelocation and need for extensive infrastructure.
A recent tax hike has made the project even more expensive,but the government has ruled out mitigating measures.
"I'm not a politician who believes that political decisionsmake something profitable," Oil and Energy Minister Tord Liensaid. "The main responsibility has to remain with the industry.We didn't create the high costs."
Expensive projects in harsh British waters West of Shetland,with planned investment of over 15 billion pounds ($24 billion)in coming years, are likely to continue because many are alreadytoo far advanced for oil majors to pull the plug.
If low oil prices persist, however, they will erode marginsand extend companies' financial pain.
Goldman Sachs estimates that Europe's integrated oilcompanies require an oil price of $122 per barrel to befree-cash-flow neutral in 2015 given their current capitalspending budgets.
To achieve a 4.5 percent free cash-flow yield by 2018,capital spending would need to fall by 13 percent at an oilprice of $90 per barrel and by 20 percent if oil falls to $80.
ARCTIC RISK
In the Barents Sea, a casualty may be OMV's ArcticWisting discovery with 150 million barrels of oil equivalent,which could need $110 per barrel to break even, according toRystad Energy.
OMV has said it needs to find more resource around the fieldand does not expect an investment decision before 2017 or 2018.
Lundin's Alta and Gohta fields also may need closeto $80 just to break even, the Rystad consultancy estimated.
"The biggest worry is the Barents Sea," said Thina MargretheSaltvedt, an oil analyst at Nordea Markets. "You can't start oneof the projects alone."
"This is a high-cost area, and they have to do a lot ofinvestment in the infrastructure," she said.
South of the Arctic circle in the Norwegian Sea, a bigproject at risk is Statoil's $4.5 billion investment to extendthe life of the Snorre field by adding a new platform. Theproject was already in doubt when oil prices were at $100, andany delay would further erode its viability as the pressure inthe field drops.
A decision on the project, planned for early next year, hasbeen delayed to the fourth quarter of 2016.
Smaller projects also in the Norwegian Sea such as Shell'sLinnorm in the Norwegian Sea and RWE's Zidane, whichhave already been delayed, could stay on ice indefinitely,analysts say.
The only investment that will go ahead without a doubt isStatoil's $18 billion Johan Sverdrup in the North Sea, wherecosts are estimated at less than $40 a barrel. The field couldhold up to 2.9 billion barrels of oil equivalent and produce upto 650,000 barrels per day after its start-up in 2019.
MATURE UK
On the British side of the North Sea, mature fields are evenmore at risk as their fixed costs rise due to the need forincreasing maintenance work at older platforms, while revenuesare declining due to lower output and falling oil prices.
"The recent fall in the oil price ... makes it much harderto attract new investment into the basin or to sustain much ofthe mature infrastructure," said Mike Tholen, the economicsdirector industry trade body Oil & Gas UK.
Tholen said the government needed to do its part in reducingtaxes to improve the region's competitiveness.
Chevron's costly future development Rosebank hasbeen delayed for several years, and its partners say anotherdelay is possible. Statoil's Bressay has already been calledoff. But developments of newly discovered fields that are toofar along to be stopped will simply go ahead with lower yields.
In British waters, oil investments peaked at 14.4 billionpounds in 2013 and were expected to be half that much by 2016,even before the recent oil price plunge. Norwegian oilinvestments, seen hitting a record $34 billion this year, couldfall 15 percent next year.
"Oil majors started to realise that their business modeldoesn't work unless the oil price continues to rise," TorbjoernKjus, an oil analyst DNB bank, said. (Additional reporting by Alister Doyle and Stine Jacobsen inOslo and Claire Milhench in London; editing by Jane Baird)
