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Norway Approves Equinor’s $6.1B Arctic Oil Project

The Norwegian Parliament has approved the development plan for the Johan Castberg oil project in Arctic waters of the Barents Sea, which will cost US$6.1 billion (49 billion Norwegian crowns) and is scheduled for first oil in 2022, project operator Equinor said on Tuesday.

Recoverable resources at Johan Castberg are estimated at 450-650 million barrels of oil equivalent, Equinor (formerly Statoil), said. The field development consists of a production vessel and a comprehensive subsea system, including a total of 30 wells distributed over 10 templates and 2 satellite structures. Johan Castberg—discovered in 2011—is currently the largest subsea field under development globally, according to Equinor.

After the oil price crash in 2014, Equinor and its partners in Johan Castberg—Eni Norge and Petoro—changed the plan concept and tried different solutions to halve the initial capital expenditures of more than US$12.4 billion (100 billion Norwegian crowns) 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.

Equinor submitted the development plans to the Norwegian Petroleum Directorate (NPD) at the end of last year. Following the approval by the directorate and by the Parliament, the project is now up for approval by the Ministry of Petroleum and Energy, which is considered a formality.

Johan Castberg is expected to boost the economy of Norway’s Arctic region, creating thousands of jobs and reviving the local oilfield services sector.

Related: China Closes The Door On Vietnam’s Oil And Gas Ambitions

The project in the Barents Sea will also help Norway’s oil production to offset recent declines—together with the giant Johan Sverdrup oilfield in the North Sea where the production start for phase one is planned for late 2019. Johan Sverdrup has resources of between 2.1 billion and 3.1 billion barrels of oil equivalents, and will be one of the most important industrial projects in Norway in the next 50 years.

Norway will be able to sustain its oil and gas production until 2023, mainly thanks to the Johan Sverdrup field. However, without major new oil discoveries, authorities fear that the industry is set for a lasting decline after 2023.

By Tsvetana Paraskova for Oilprice.com

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