Norwegian oil giant Statoil has managed to drive down the cost of development of its giant Johan Sverdrup field in the Norwegian Sector of the North Sea.

“Since the plan for development and operation (PDO) of the Johan Sverdrup field was approved by Norwegian authorities, Statoil has cooperated with partners, authorities and suppliers on improving the project. The positive development of investment costs for Johan Sverdrup continues,” Statoil said on Monday.

The first phase is currently estimated at NOK 99 billion, a reduction of NOK 24 billion since the PDO was submitted. The present break-even is reduced to below $25 per barrel for phase 1.

“We are now seeing the results of good cooperation between Statoil, its partners, and suppliers. We are strongly reducing investment costs, and we are increasing the process capacity, resource estimate and value of the field. Johan Sverdrup is a world-class project, and we want to create high value for the owners and society for generations,” says Eldar Sætre, CEO of Statoil.

The improvements for phase 1 have been achieved by higher drilling and well efficiency and high quality in project planning and execution, Statoil said.

Full field development cost down as well

The Johan Sverdrup project will be developed in several phases, and a comprehensive effort has been made to develop the concept for full-field development of Johan Sverdrup. The estimate for the full-field investment has been improved from a range of NOK 170–220 billion in 2015 to NOK 140–170 billion (2016 value).

The improvements made for the Johan Sverdrup full-field development are mainly a result of optimization and simplification of the development concept for future phases, in close cooperation with the supplier industry.

Statoil has also focused on removing bottlenecks in the facilities to expand processing capacity on the Johan Sverdrup field center. The work on optimizing the processing facility for phase 1 has been successful. Phase 1 production capacity is currently estimated at 440,000 barrels of oil per day. The PDO initially estimated the phase 1 production capacity to be between 315,000 and 380,000 barrels of oil per day.

So far, the Johan Sverdrup partners agree on expanding the production capacity on Johan Sverdrup by introducing an extra processing platform on the field centre. This will increase the expected full production capacity on the Johan Sverdrup full field to 660.000 barrels of oil per day. The PDO estimated full production from Johan Sverdrup to be 550,000–650,000 barrels of oil per day. Final concept selection for future phases will be decided upon project pre-sanction (DG2).

Statoil has worked on deepening its understanding of the reservoir, in collaboration with its partners. This has reduced the uncertainty of the reserve estimate for the whole field. Since the PDO for the first phase was submitted the range of the full-field resource estimate has improved from 1.7-3.0 to 1.9-3.0 billion barrels of oil equivalents.

The capacity increase, together with improved reserve estimate and investment costs, has helped reduce the break-even for the full-field development of Johan Sverdrup to below $30 per barrel.

“We will continue our improvement effort, and Statoil and its partners have decided to spend more time on this work until project pre-sanction and a final investment decision has been reached for future phases. At the same time we want to stay on schedule for full-field production start and for establishing an area solution for land-based power by 2022, as per conditions stated in the approved PDO for phase 1,” says Margareth Øvrum, executive vice president for Technology, Projects & Drilling in Statoil.

The PDO for phase 1 of Johan Sverdrup originally called for project pre-sanction (DG2) of future phases in 2016 and investment decision at the end of 2017. According to an updated plan the project pre-sanction will be made in the first half of 2017, and a final investment decision will be reached and PDO will be submitted in the second half of 2018. Full-field production start will be 2022, as originally planned.

1 billion NOK ˜ 120.6 million USD