A sign for a Statoil petrol station is seen in Oslo in this Dec. 11, 2012 file photograph.SUZANNE PLUNKETT/Reuters
Statoil ASA's, Norway's biggest energy company, said the Johan Castberg oil discovery in the Arctic Barents Sea can be developed profitably even after oil prices have tumbled more than 30 per cent in five months.
"We'll be able to find a profitable standalone solution for Castberg," Erik Strand Tellefsen, vice-president for field development in northern Norway, said Monday in an interview in Oslo. "Even with the current oil price."
Developing the find on its own using a floating production, storage and offloading unit remains the cheapest option, he said. Nearby finds by Lundin Petroleum AB have increased the possibility that a combined development including a new onshore oil terminal at North Cape can be commercially viable, he said.
Benchmark Brent crude has slid more than $35 (U.S.) to below $80 a barrel from a June high, putting pressure on the margins companies can expect from projects in areas such as the Arctic. The plunge comes as Statoil and other oil companies are also seeking to rein in investments after a decade of rising costs have hurt shareholder returns.
Norway's Barents Sea, estimated to hold 40 per cent of Norway's undiscovered resources and seen as key to halt a 13-year decline in the country's crude production, lacks infrastructure including terminals and pipelines. The first oil field scheduled start production in the area, Eni SpA's Goliat deposit, is headed for a 50 per cent cost overrun when it starts output next year, according to the government.
Broad Interest
Statoil has turned to Lundin and OMV AG to discuss developing finds in the area that would include a land terminal, an option shelved last year on cost concerns.
"We've had quite a broad interest," Tellefsen said. It's too early to say what the outcome of the talks will be and Statoil still plans to present a new concept for Castberg by next summer. Output won't start until the early 2020s, he said.
Rystad Energy
AS, an Oslo-based consult, said this month that the break-even price for a standalone development of Castberg was between $60 and $70 a barrel, and that a joint development with a land-based terminal wasn't currently profitable.
Statoil delayed Castberg for a second time in June after a disappointing exploration campaign that failed to boost volumes sufficiently. Statoil found oil in only two of five wells drilled near the breakthrough Skrugard and Havis discoveries from 2011 and 2012, and only one of the new finds is deemed commercially viable, Tellefsen said.
Drivis contains 42 million to 54 million barrels of recoverable oil, while a second find, Skavl, which holds 20 million to 50 million barrels, isn't commercial for now because it would require too many wells to exploit, Tellefsen said.
That puts Statoil's current resource estimate for Castberg, including Drivis, at between 450 million and 650 million barrels of oil, he said.