Statoil recommends Johan Castberg project delay

Statoil, citing resource and political uncertainties with the Johan Castberg oil development it operates in the Barents Sea offshore Norway, has recommended that the partners delay the investment decision.

Statoil has continued to mature the project’s resource base and development plans, but the company said uncertainties remain that are related to the resource estimate and investment level.

Oystein Michelsen, Statoil’s executive vice-president for development and production in Norway, said, “In addition, the Norwegian government has recently proposed reduced uplift in the petroleum tax system, which reduces the attractiveness of future projects, particularly marginal fields and fields which require new infrastructure. This has made it necessary to review the Johan Castberg project.”

The partners in the PL 532 license earlier this year selected a development concept for the project, including a new oil terminal at Veidnes outside Honningsvag in Finnmark County, Norway (OGJ Online, Feb. 12, 2013).

It has been announced, Statoil noted, that state aid regulations will be used to enable onshore landing of oil and gas in northern Norway, as in the Snohvit project. However, these plans have not been specified and presented as part of the proposal which is up for approval in the Norwegian parliament.

State aid will require notification to and approval by European Free Trade Association Surveillance Authority, which means significant uncertainty for the project at the present time.

“The updated project estimates and the new uncertainty in the tax framework has made it necessary to consider what consequences this may have for the development concept,” Michelsen said.

Statoil is drilling four exploratory wells around Johan Castberg. The objective is to prove additional resources to add further robustness to a potential development. This is part of a wider campaign that also includes more exploratory wells in other areas of the Barents.

Johan Castberg (PL 532) is 240 km northwest of Hammerfest in Norway. The project consists of the 2011 Skrugard discovery and 2012 Havis discovery, for which combined preliminary volume estimates are 400-600 million bbl of recoverable oil.

Statoil said the company’s ambition of producing more than 2.5 million b/d of oil equivalent in 2020 remains unchanged, including the ambition of producing more than 1.4 million boe/d from the Norwegian Continental Shelf.

Statoil is the operator of production license PL 532 with 50% equity. Eni Norge AS has 30% and Petoro 20%.

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