Norway's Petroleum Safety Authority has given the go-ahead to oil major Statoil (NYSE:STO) to start drilling an exploration well at the giant Johan Sverdrup oil field, where production is planned to begin in 2019.
Statoil, which is the operator of the field, is expected to start drilling next month, with drilling activities estimated to last 30 days, the Norwegian authority said.
In August of this year, Statoil, which holds 40 percent in Johan Sverdrup, reduced its estimated development costs of the first phase of the giant oil field by the equivalent of US$2.8 billion (24 billion Norwegian kroner). The Norwegian company also reduced the break-even price to below US$25 per barrel for phase 1. Optimization encouraged Statoil to raise current estimates for the phase 1 production capacity to 440,000 barrels of oil per day from the originally expected 315,000-380,000 bopd.
The partners in the project - Statoil, Lundin Norway, Petoro, Det norske oljeselskap, and Maersk Oil - agree on expanding production capacity with an extra processing platform, which will increase the capacity on the Johan Sverdrup full-field to 660,000 bopd from the previously expected 550,000-650,000 bopd.
Related: Credit Markets Have Oilfield Services In A Lockdown
Statoil also lifted the lower end of the resource estimate range to 1.9-3.0 billion barrels of oil equivalents from 1.7-3.0 billion barrels of oil equivalents.
However, Statoil's US$25 break-even price per barrel at Johan Sverdrup is atypical of North Sea oil field developments, and not a proxy for the region's profitability and costs, analysts say.
"The Johan Sverdrup project has one of the lowest breakeven prices of global new developments," said Mhairidh Evans, a senior research analyst at Wood Mackenzie.
Johan Sverdrup is a unique field and not representative of the opportunities in other parts offshore Norway or in the UK Continental Shelf (UKCS), according to Mike Tholen, the upstream policy director of industry association Oil & Gas UK.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More