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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-controlled 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 Oljeselskap 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 30, 2016 02:49 ET (06:49 GMT)

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