Statoil Delays Two Major Projects on Norwegian Continental Shelf

Photo courtesy Statoil
Photo courtesy Statoil

Statoil says it is delaying two major projects on the Norwegian continental shelf amid low oil prices and the need for more robust planning in order to cut costs.

Decisions on future developments of the two projects, Johan Castberg and Snorre 2040, are not expected now until the second half of 2016 for Castberg and fourth quarter of 2016 for the Snorre 2040 project.

“Castberg and Snorre 2040 are two major and important projects in our portfolio, and it is important that we find sound and robust development solutions for them,” says Ivar Aasheim, Statoil’s senior vice president for field development on the NCS.

Regarding the Johan Castberg project, Statoil says the partnership has decided to postpone the concept decision, the so-called DG2, until the second half of 2016, with expectations for an investment decision in 2017. Statoil notes that although the project has achieved significant cost reductions in recent years, the partnership companies, licensees Statoil, Petoro, and Eni, see further potential. The proven volumes in Johan Castberg field, situated approximately 100 kilometers north of the Snøhvit-field in the Barents Sea, are estimated at between 400 and 650 million barrels of oil.

The concept decision for Johan Castberg was previously scheduled for summer 2015.

“We have made significant progress in reducing costs for Johan Castberg. However, current challenges in relation to costs and oil prices require us to spend more time to ensure that we extract the full benefit of the implemented measures,” Aasheim says.

The Snorre partnership, made up of licensees Statoil, Petoro, ExxonMobil, Idemitsu, RWE Dea, and Core Energy,  has been face with similar issues.

The preliminary decision to extend the progress plan for Snorre 40 is now expected in the fourth quarter of 2016. The decision includes whether or not to extend the lifetime of the existing platforms Snorre A and Snorre B until 2040 in order increase recovery from the Snorre field. The selected concept is to construct a new platform, Snorre C, which would increase the recovery rate at the field to 54%. A final investment decision is now scheduled for 4Q 2017, with production start in 4Q 2022.

The previous final investment decision and production start-up for the Snorre 2040 concept were planned for Q4 2016 and Q4 2021, respectively.

With an estimated reserve of 1.63 billion barrels of oil, Snorre is one of the fields with the largest remaining oil resources on the Norwegian continental shelf, but will require high investments in order to produce the resources, making profitability a challenge. Currently 35% of the oil is produced and the estimated recovery rate from existing infrastructure is 47% by 2040. Located on the Norwegian North Sea, this Snorre field has been producing oil and gas since August 1992.

“We see that our efforts have yielded results, and we are focused on reaping the full benefits of this in a way that ensures a sustainable and profitable utilisation of the resources in the Snorre and Johan Castberg fields. The recent decline in oil prices emphasises this,” Aasheim says.