Norway Oil Coffers About to Get Giant Boost From the North Sea
(Bloomberg) -- Equinor ASA has started its Johan Sverdrup oil field, a rare mega-project in the North Sea that’s been a boon for Norway’s offshore industry and now promises to deliver a huge production boost for the country.
Discovered in 2010 in an area that had been disregarded by most explorers, the site started production on Saturday and is set to reach 440,000 barrels a day by next summer. That represents a 33% addition to Norway’s production in the first half of this year, a spike in output not seen since the 1980s.
It’s hard to overstate the importance of Sverdrup for its owners, the Norwegian state and the country’s entire oil industry.
Confidence about the field’s startup was key for state-controlled Equinor’s decision to kick off a long-awaited $5 billion buyback program in September, and Sverdrup will be a driving force in the company’s production growth in the next years. It also helped to transform Lundin Petroleum AB -- which made the initial discovery -- and Aker BP ASA into two of the most important companies in Norway’s oil industry.
“Sverdrup coming on stream is a momentous occasion for Equinor, our partners and suppliers,” the state-controlled company’s chief executive officer Eldar Saetre said in a statement on Saturday. “At peak, this field will account for around one third of all oil production in Norway and deliver very valuable barrels with record low emissions.”
With as much as 3.2 billion barrels in reserves, it’s Norway’s biggest discovery since the 1970s. In an illustration of how unusually large the field is, Aker BP considered going to court over a few decimals in ownership.
|Location: 160km west of Stavanger|
|Size: 2.2-3.2 billion barrels of oil|
|Phase 1: NOK83b in investments, startup Oct. 2019, max. output 440,000b/d|
|Phase 2: NOK41b in investments, startup 4Q 2022, max. output 660,000b/d|
|Field break-even: less than $20 a barrel|
|Owners: Equinor 42.6%, Lundin 20%, Petoro 17.4%, Aker BP 11.6%, Total 8.4%|
Equinor expects Sverdrup to contribute about $100 billion to Norway’s state coffers over 50 years. The field’s timing was also perfect for the Nordic country: green-lighted in 2015, just after a historic collapse in the crude market, it offered a lifeline to the embattled oil-service industry, even if the market slump forced suppliers to cut prices.
“It rescued us” from a “mega-crisis,” former Petroleum and Energy Minister Terje Soviknes said last year.
For Equinor and the other owners, the timing was even better. The discount on services and equipment allowed Equinor to slash investments by as much as 44% compared to the highest early estimates, giving the field an overall break-even price of less than $20 a barrel.
Equinor Jumps After Starting $5 Billion Buyback Program
Sverdrup was originally scheduled to start production in December this year, but Equinor advanced the date to October. The field will reach maximum output of 660,000 barrels a day in its second phase in 2023.
The field will be powered from land, reducing emissions of climate gases by as much as 90%. Emissions of 0.67 kilos of carbon dioxide per barrel in the production phase are among the lowest in the world and compare to averages of about 9kg in Norway and 18kg globally, according to Equinor.
©2019 Bloomberg L.P.