Norway's oil major Statoil submitted to authorities on Tuesday the plan for developing and operating the Johan Castberg oil field that is expected to take capital expenditures of US$5.89 billion (49 billion Norwegian crowns) and become the northernmost oil field development on the Norwegian Continental Shelf.
Recoverable resources at Johan Castberg in the Barents Sea are estimated at 450 million - 650 million barrels of oil equivalent, which makes the Johan Castberg project the biggest offshore oil and gas development to be given the go-ahead in 2017, Statoil said, adding that first oil is scheduled for 2022.
"The project was not commercially viable due to high capital expenditures of more than NOK 100 billion and a break-even oil price of more than USD 80 per barrel. We have been working hard together with our suppliers and partners, changing the concept and finding new solutions in order to realize the development," Margareth Øvrum, Statoil's executive vice president for Technology, Projects and Drilling, said.
"Today we are delivering a solid PDO for a field with halved capital expenditures and which will be profitable at oil prices of less than USD 35 per barrel," Øvrum added.
Statoil is the operator of the Johan Castberg partnership with a 50-percent stake, while Eni has 30 percent, and Petoro the remaining 20 percent.
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Commenting on the plan, the Norwegian Petroleum Directorate (NPD) said that it was a "milestone for the Barents Sea" and that Johan Castberg "will become the first infrastructure in this petroleum province and will thus become an important building block for future activity in the Barents Sea southwest and further north."
Both Statoil and the NPD have voiced concerns that in a few years' time, Norway's production will drop off unless new discoveries are made. Statoil will focus on exploration in the North Sea and the Norwegian Sea next year. After 2025, oil production and drilling activity are expected to significantly drop off unless there are new discoveries, according to Statoil.
"The field is essential for continuous production growth on the Norwegian continental shelf for Statoil from 2022 onwards," Danske Bank analyst Anders Holte told Reuters on Tuesday, commenting on the Johan Castberg development plan submitted today.
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. More