North Sea Sverdrup's costs come down, resources go up
London, 7 February (Argus) — Norway's state-controlled Statoil has again cut the cost estimate for the giant Johan Sverdrup oil field in the North Sea.
The firm now expects the project's 440,000 b/d first phase to cost 88bn Norwegian kroner ($11bn) to develop, down from its previous guidance of NKr92bn. Statoil's initial estimate was NKr123bn when Norwegian authorities approved phase 1 in 2015.
The company has also narrowed its cost estimate for the field's 220,000 b/d second phase to under NKr45bn from previous guidance of NKr40bn-55bn. All investment projections are in nominal terms, based on fixed currency.
Standardisation of equipment packages, close collaboration with suppliers and good drilling efficiency have contributed to the capital expenditure (capex) reductions.
"We have drilled more wells than planned, more than one year ahead of plan, which has contributed greatly to cost reductions in the project," executive vice-president of technology, projects and drilling Margareth Ovrum said. "The wells also make our production plans even more robust and have improved our knowledge of the reservoir. Based on this, we are now able to increase the resource estimate for Johan Sverdrup further," she said.
The field's recoverable resources are now pegged at 2.1bn-3.1bn bl of oil equivalent (boe), up from previous guidance of 2bn-3bn boe and initial guidance of 1.7bn-3bn boe when the development plan was submitted.
It is not just John Sverdrup's capex that is on a downward trend. Statoil has also cut the estimate for phase 1's annual operating expenditure (opex) by almost NKr1bn, or around 30pc, since 2015. This has been driven by "a more streamlined operation and maintenance model, combined with increased use of digital and automated solutions", the firm said.
Capital efficiency and cost-cutting have helped push the breakeven oil price for phase 1 to below $15/bl. The breakeven price for the whole field is pegged at under $20/bl.
Phase 1 remains on track to come on stream in late 2019. Statoil is targeting a final investment decision (FID) on phase 2 in the second half of this year, with start-up scheduled for 2022.
The company operates the field with a 40pc stake. Norway-focused independents Lundin Petroleum and Aker BP hold 22.6pc and 11.6pc, respectively. Norway's state-owned oil and gas holding company Petoro has a 17.4pc interest. And Denmark's Maersk Oil — soon to be acquired by Total — holds the remaining 8.4pc.