Formal approval by the Norwegian parliament of Equinor’s plan to develop the Johan Castberg area within the Barents Sea indicators the beginning of an formidable challenge that’s poised to generate some NOK 264 billion ($33 billion) in income, in accordance with calculations by vitality analysis and enterprise intelligence firm Rystad Energy. The overwhelming majority of those income will go to the Norwegian authorities within the type of tax revenues.
“This marks the tip of a seven-year battle by Equinor and its companions to make this discovery industrial, and it marks the launch of a profitable new improvement section for Norway’s northernmost oil province,” says Espen Erlingsen, head of upstream at Rystad Energy. In complete, Rystad Energy calculates that the challenge might generate round NOK 235 billion in revenues for the Norwegian authorities.
Johan Castberg is situated within the Barents Sea about 110 km north of Equinor’s Snøhvit fuel area, and is estimated to carry confirmed volumes of between 400 MM and 650 MMbo, making it the most important and most vital oil and fuel challenge within the Barents Sea up to now. “Its impression on the Norwegian continental shelf shall be eclipsed solely by that of the enormous Johan Sverdrup challenge at present progressing within the North Sea,” Erlingsen provides.
The Johan Castberg challenge is scheduled to return on stream in 2022 and entails the joint improvement of three separate fields – Skrugard (found in 2011), Havis (2012) and Drivis (2014). The improvement idea – based mostly on a big floating manufacturing, storage and offloading vessel (FPSO) – was chosen after preliminary plans to develop the sphere as a subsea tieback to shore had been deemed too costly and subsequently shelved.
A disappointing exploration marketing campaign in 2014 and better give attention to price reductions are seemingly causes for why an FPSO idea was chosen. Operator Equinor (previously Statoil) experiences that the event prices have been minimize from NOK 100 billion in 2012 to lower than NOK 50 billion at current. These financial savings replicate a mixture of the redesigned improvement answer, decrease unit costs from the oilfield service business and useful foreign money results.
Rystad Energy estimates that the breakeven value for the challenge has declined steadily over time, from about $80/bbl in 2012 to only above $30/bbl at current.
The mixture of decrease improvement prices and stronger oil costs have reworked Johan Castberg right into a extremely industrial challenge. With a Brent oil value of $75/bbl, Rystad Energy estimates that the cumulative income of the challenge shall be round $45 billion during the sphere’s manufacturing life.
The cumulative price of the challenge is estimated to be $12.three billion, thus leaving $33 billion of revenue to be cut up between the Norwegian authorities and the oil firms within the license group. Out of this, some $25.1 billion will go to the Norwegian authorities via direct taxes.
In addition, the Norwegian authorities is a direct proprietor in Johan Castberg via its possession of state oil firm Petoro. This possession is anticipated to generate $1.6 billion in income for the federal government. The authorities additionally owns 67% in Equinor, which is anticipated to contribute one other $2.6 billion to the Norwegian state.
“In complete, this suggests that the Norwegian authorities stands to earn $29.5 billion, or NOK 235 billion, from this frontier challenge,” Erlingsen concludes.
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