Statoil to Cut Costs, Raise Output at Giant North Sea Oil Project -- Update
August 29 2016 - 4:09AM
Dow Jones News
By Kjetil Malkenes Hovland
OSLO---Norway's Statoil ASA has slashed billions of dollars off
planned spending on the giant Johan Sverdrup field in the North
Sea, ensuring it should remain profitable even if oil prices fall
to around half current levels.
The state-owned oil producer also forecast as much as a 40%
increase in initial daily production capacity from the field.
The recalibration of one of Norway's biggest-ever oil
projects--a rare example of a major investment that has gone ahead
since the collapse in oil prices in the past two years--shows the
pressure oil producers including Statoil are still under with oil
prices hovering below $50 a barrel.
But it is a sign that oil companies operating in the North Sea
are succeeding in lowering costs by simplifying projects, partly
through more efficient drilling, and by negotiating cheaper
contracts with contractors as oil-services firms have scrambled to
retain business amid the cutbacks across the sector.
"We are strongly reducing investment costs, and we are
increasing the process capacity, resource estimate and value of the
field," said Statoil Chief Executive Eldar Saetre on Monday.
The field is among the handful of "elephants," or fields
exceeding 1 billion barrels of recoverable resources, found
globally each year. It will be a cornerstone of Norway's oil
production, contributing an estimated 40% of the country's total
crude output in the 2020s.
"Johan Sverdrup is a world-class field," Mr. Saetre said.
The state-controlled oil and gas producer said it has reduced
spending in the field's first phase to 99 billion Norwegian kroner
($11.96 billion) from the previously targeted 123 billion
kroner.
Total spending, including a second phase of investment and
expansion of the production capacity, is now expected at 140
billion kroner to 170 billion kroner, down from 170 billion kroner
to 220 billion kroner, Statoil said.
The price of oil at which the project will be profitable has
fallen to below $25 a barrel, down from a previous forecast of
below $30 a barrel given in February and a forecast of below $40 a
barrel a year earlier.
The field's production capacity will be 440,000 barrels a day in
the first phase, compared with a previous estimate of 315,000 to
380,000 barrels a day, Statoil said. The North Sea field,
discovered in 2010, is estimated to hold between 1.9 billion and 3
billion barrels of oil equivalent.
British oil major BP PLC is set to gain a 3.48% stake in Johan
Sverdrup via Aker BP ASA, the North Sea oil group that BP and
Norway's Det Norske Oljeselkap ASA agreed to set up in June by
combining some of their assets.
Write to Kjetil Malkenes Hovland at
kjetilmalkenes.hovland@wsj.com
(END) Dow Jones Newswires
August 29, 2016 03:54 ET (07:54 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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