Norway Approves $6 Billion Plan for Johan Castberg Field

Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Norway's Ministry of Petroleum and Energy has approved Equinor's (NYSE:EQNR) (Stavanger, Norway) plan for development and operation (PDO) of the $6 billion Johan Castberg oil and gas field in the Barents Sea.

First oil is scheduled for 2022, and the field has a production horizon of 30 years according to Equinor, formally known as Statoil ASA, but renamed in recent months as part of a shift to a cleaner energy model. For additional information, see March 21, 2018, article - Oil & Gas Major Statoil Changes Name to 'Equinor'.

The Johan Castberg (formerly Skrugard) field is situated approximately 100 kilometres north of the Snøhvit field in the Barents Sea. The company expects to spend roughly 49 billion Norwegian kroner ($6.1 billion) on development, with recoverable resources estimated at 450 million to 650 million barrels of oil equivalent (boe). The field development consists of a production vessel and a comprehensive subsea system, including a total of 30 wells distributed on 10 templates and two satellite structures. The company stated that the Johan Castberg project is currently the largest subsea field under development globally. The Johan Castberg partnership consists of Equinor (operator 50%), Eni Norge (30%) and Petoro AS (20%).

"This is a great day for the project and for the licence partners," said Margareth Øvrum, Equinor's executive vice president for Technology, Projects and Drilling. "After all, this is the first development plan to be approved for Equinor and it is not just any project either. It was a long road for Johan Castberg after the first discovery in 2011. Today we have a solid project that will be central in the further development of the northern regions."

Wildly fluctuating oil prices in recent years have affected the rollout of the project, with Eqiunor admitting that the future of the project was in doubt when oil prices dropped in 2014. The original capital expenditures were estimated at more than 100 billion Norwegian kroner ($12.3 billion) and the break-even oil price was more than $80 per barrel. The company has worked with supplier and engineering partners to create a new solution for Castberg and believes that the project is profitable at an oil price below $35 per barrel.

Knut Gjertsen, project director for Johan Castberg, commented: "The project is on schedule, and gradually we will see the results of the construction work. Many yards and companies across the country will be busy with Johan Castberg deliveries in the years to come".

The Johan Castberg field will have a supply and helicopter base in Hammerfest and an operations organisation in Harstad. The costs of operating the field are estimated at some NOK 1.15 billion ($185 million) per year.

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