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INTERVIEW-A year after Elgin shutdown, Total restarts production

Mon, 11th Mar 2013 07:32

* Total restarted output at Elgin field on March 9

* Elgin to reach pre-leak output capacity in 2015

* Total to "kill" at least 10 wells at Elgin on safety norms

* Total needs HSE green light to give full accident reasons

* Leak had shaved off 0.2 pct points of UK's 2012 GDP

By Muriel Boselli and Michel Rose

PARIS, March 11 (Reuters) - Total restartedproduction on Saturday at its huge Elgin gas field in the NorthSea, almost a year after a major gas leak which cost the companymillions of euros in lost output and even impacted UK economicgrowth.

Total will not release the full details of what went wrongwith the G4 well until it gets the go-ahead from Britain'sHealth and Safety Executive (HSE), which gave its clearance lastweek for the French group to restart the field.

Total's G4 well in the Elgin field, which spewed gas forover seven weeks after the leak, will return to production of60,000 barrels of oil equivalent per day (boepd) by the end ofthe month, half its pre-leak level, two Total executives said.

"We can expect that after 11 months of outage, the restartwill take place in a series of restarts and stoppages,"Yves-Louis Darricarrere, Total's head of exploration andproduction, told Reuters in a telephone interview.

The field, located 240 km off the eastern coast of Scotlandand operated by Total which has a 46.2 percent stake, wouldreturn to its pre-accident production level in 2015 and wouldreach between 130,000 and 140,000 boepd in 2016, a higher levelthan what was forecast before the accident, the executives said.

"The accident has not diminished the reserves, so what wedidn't produce during the time interval (2012-2015) will meanmore production for 2016, 2017 and 2018," Darricarrere added.

Elgin and the nearby Franklin field, which startedproduction in 2001, accounted for nearly 3 percent of Britain'soutput and the shutdown registered on Britain's ailing economy,as falling oil and gas production knocked 0.2 percentage pointsoff gross domestic product last year.

Total, which is one of Britain's biggest investors, alsosaid more stringent safety rules at the field meant it wouldkill a minimum of 10 wells, out of a total of 19, over athree-year period, by injecting some 800 metres of cement perwell.

The production increase will be achieved by the developmentof two big projects: phase two of West Franklin and a revamp ofElgin, expected to be finalised this summer, Darricarrere said.

"The Elgin Franklin field has produced 700 million barrelsof oil equivalent and there is still 500 million to produce, thesize of an elephant (industry jargon to describe a field of morethat 500 million boe)," the executive said.

"HUMILITY LESSON"

News of the gas leak in March last year revived memories ofBP's Deepwater Horizon disaster and had an initiallysevere impact on Total shares, which fell almost a fifth in thetwo months after the initial leak.

The stock has since recovered to trade just 2 euros belowthe 41 euros seen before the accident, but is still valued atonly 7.3 times 12-month forward earnings, a 20 percent discountto its peers globally and a 10 percent discount to BP and Shell.

Darricarrere said the cost of the closure for Total hadreached 1 million pounds ($1.5 million) a day in lost revenue -suggesting a total loss in revenue between March 25, 2012, andMarch 11, 2013 of $526 million.

The company said almost all of its repair bill had beenreimbursed by insurers.

Total insisted the accident, which forced the evacuation of238 workers, was unique to the G4 well and was a first in thehistory of the oil and gas industry, but declined to disclosethe details of what made it such a special case.

Patrice de Vivies, chairman of Total Holdings UK, cited pipecorrosion due to a chemical reaction between bromide in thedrilling fluid and grease in the pipework in a highlypressurised and heated environment.

But de Vivies acknowledged the equipment was commonly usedin the sector and those circumstances alone were not sufficientto fully explain the accident.

"I can tell you that I have the duty to communicate what wehave found when we'll have the green light of the HSE to ensurethis type of accident does not happen again," de Vivies said."For the moment the information in not public."

He added such an accident could not occur in the other ElginFranklin wells, where bromide was not used in the same way.

De Vivies said the accident had been a jolt for thefifth-largest western oil group, which describes itself as adeepwater pioneer and had used the Elgin Franklin field, one ofBritain's largest, as a display for its technological prowess.

"This is of course a humility lesson," De Vivies said. "Wewere using the best technology there and the best teamsworldwide so it was a shock that it happened to us." ($1 = 0.6645 British pounds) (Editing by David Holmes)

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