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Equinor has decided not to build a ship-to-ship reloading terminal onshore northern Norway to handle the crude oil that would come from the Arctic field development Johan Castberg, because costs would be too high, the Norwegian major said on Friday.
Equinor, together with its partners Vår Energi and Petoro, has studied several solutions for an oil terminal at Veidnes in Finnmark county, which would have served to reload crude oil from the Johan Castberg oilfield when it comes online in 2022. However, the partners have concluded that the costs would be too high, and the oil terminal would incur much higher financial losses than exporting the oil from Johan Castberg directly to the market.
In the middle of 2018, the Norwegian Parliament approved the development plan for the Johan Castberg oil project in Arctic waters of the Barents Sea. The project is set to cost US$5.4 billion (49 billion Norwegian crowns) and is scheduled for first oil in 2022.
Recoverable resources at the Johan Castberg field under development are estimated at 450-650 million barrels of oil equivalent.
After the oil price crash in 2014, Equinor and its partners changed the plan concept and tried different solutions to halve the initial capital expenditures and to make the project profitable at below US$35 a barrel of oil, compared to the original breakeven oil price of above US$80 a barrel, Equinor said last year.
Anders Opedal, executive vice president for Technology, Projects and Drilling in Equinor, said in a statement today:
“In a demanding period for the industry we have managed to develop Johan Castberg into a profitable project. We have however not been able to develop a profitable export solution for the Johan Castberg oil involving a terminal at Veidnes. The partners are therefore discontinuing their
studies of ship-to-ship oil transfer for Johan Castberg in Finnmark.”
Johan Castberg was expected to boost the economy of Norway’s Arctic region, creating thousands of jobs and reviving the local oilfield services sector.
Equinor’s decision to abandon an oil terminal project, however, would mean fewer jobs. Norway’s biggest oil workers’ union, Industri Energi, said that it was “very disappointed” that Veidnes would not host an oil terminal.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.