The FINANCIAL -- Statoil on December 5 submits the PDO (plan for development and operation) for the Johan Castberg project on behalf of the partnership with Eni and Petoro. Several major contracts will also be awarded to Norwegian industry.
“This is a great day! We have finally succeeded in realising the Johan Castberg development. The project is central part of the further development of the northern regions, and will create substantial value and spinoffs for Norway for 30 years,” says Margareth Øvrum, Statoil’s executive vice president for Technology, Projects and Drilling.
Capital expenditures for Johan Castberg are estimated at some NOK 49 billion. Recoverable resources are estimated at 450 – 650 million barrels of oil equivalent. This makes the Johan Castberg project the biggest offshore oil and gas development to be given the go-ahead in 2017. First oil is scheduled for 2022.
“Johan Castberg has brought challenges. 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 realise the development. 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 says.
“Johan Castberg will be the sixth project to come on stream in Northern Norway. The field will be a backbone of the further development of the oil and gas industry in the North. Infrastructure will also be built in a new area on the Norwegian continental shelf. We know from experience that this will create new development opportunities,” says Arne Sigve Nylund, Statoil’s executive vice president for Development and Production Norway.
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 per year. This will represent about 1700 man-years nationwide, some 500 of which will be located in Northern Norway. This includes both direct and indirect effects, according to Statoil.
-Johan Castberg will be producing for more than 30 years, and the greatest spinoffs will be generated in the long production phase. Castberg will create considerable activities for Norwegian supply companies and generate ripple effects in Northern Norway,” Nylund says.
Parallel with the submission of the PDO Statoil is signing a contract both for the Johan Castberg subsea system, and engineering and procurement management, both with Aker Solutions AS. The contracts have a total value about NOK 4 billion.
Johan Castberg is a big subsea development, and this contract includes 30 wells, 10 subsea templates and two satellite structures.
“We are pleased to see that Norwegian suppliers again demonstrate their competitiveness and will play a key role in the development of Johan Castberg. The jobs generated nationwide during the development are estimated at almost 47 000 man-years,” Øvrum says.
Statoil, on behalf of the partners in the Snorre licence, is also signing a letter of intent (LoI) with FMC Kongsberg Subsea AS for the subsea system for Snorre Expansion Project (SEP). The LoI is worth slightly less than NOK 2 billion and includes 6 subsea templates and subsea production equipment for a total of 24 wells.
The press is invited to Melkøya in Hammerfest at 12.15. Torger Rød, SVP, project management control, and Siri Espedal Kindem, SVP Operations North, will then hand over the Johan Castberg PDO to Minister of Petroleum and Energy, Terje Søviknes.
The press is also invited to the contract signing at 13.00 at Aker Fornebuporten. Executive vice president Margareth Øvrum will participate from Statoil together with Luis Araujo in Aker Solutions AS. All contracts are subject to government approval of the PDO.
The Johan Castberg partnership consists of Statoil (operator 50%), Eni (30%) and Petoro (20%).
The field development concept includes a production vessel and extensive subsea development with a total of 30 wells, 10 subsea templates and two satellite structures. This is the biggest subsea field under development in the world today.
The Johan Castberg development costs are estimated at around NOK 49 billion. The jobs generated nationwide during the development are estimated at slightly less than 47,000 man-years, some 1800 of which will be located in Northern Norway.
The Johan Castberg project will account for a substantial part of the investment level on the NCS in 2018-2022.
Together with other operators of oil discoveries in the Barents Sea Statoil is investigating the possibility of finding a profitable oil terminal solution at Veidnes.