Equinor retreats from frontier exploration in Norway’s Arctic

Equinor will reduce its focus on the frontier areas of the Barents Sea in another blow to Norway’s ambition to build a new oil province in its Arctic region. Equinor has signed an agreement to divest to Repsol its 63% interest in. Equinor reports adjusted earnings of USD 2.59 billion and USD 1.08 billion after tax in the third quarter of 2019. Oil from the giant Johan Sverdrup field in the North Sea has arrived at the Mongstad plant north of Bergen. Equinor and the Snorre and Gullfaks partners have made a final investment decision for the Hywind Tampen offshore wind farm. Equinor has been awarded exploration acreage in the Northern Carnarvon Basin offshore Western Australia.

Tim Dodson, the company’s executive vice president says “Our focus going forward will be on the more prolific areas of the Barents Sea”.

It means drilling near existing discoveries such as Johan Castberg and Wisting rather than riskier but potentially more rewarding targets. Equinor is the operator for 21 projects in the execution phase, with a total investment of around 210 billion kroner. On 5 October Equinor and the Johan Sverdrup partnership consisting of Lundin Norway, Petoro. Equinor has entered into an agreement to sell a 25% ownership interest in the Arkona offshore wind farm. The oil industry’s excitement for the Barents Sea southeast, a new exploration area close to the maritime border with Russia, has been followed by disappointment. Equinor, on behalf of the Njord licence, has awarded Saipem a subsea service contract using a wireless underwater intervention drone.

Its onshore business in the Eagle Ford in the US state of Texas. IFRS net operating income was negative USD 0.47 billion. The event is being celebrated at the plant last week. Two updated plans for development and operation will be submitted to Norwegian authorities. The prospects had a smaller chance of succeeding than others in better known areas. This is a great day for Equinor and the Johan Sverdrup partnership, consisting of Lundin Norway, Petoro, Aker BP. The new exploration permit, WA-542-P, has been awarded to Equinor as operator and 100% owner. The high hopes attached to them because they were some of the biggest geological structures remaining off Norway.

Aker BP and Total, started production from the giant field in the North Sea. The funds advised by Credit Suisse Energy Infrastructure Partners AG. The contract will make Equinor the first user of technology expected to be completed in 2020. Norway has been counting on discoveries in the Barents Sea to limit a decline in its petroleum production. Company pleased with this award which expands position in Australia with an exploration opportunity in a proven basin. NOK 40 billion below the original estimates in the Plan for development and operation. The oil and gas platforms will be the first ever powered by a floating offshore wind farm.

It expected to start around the middle of the next decade. Johan Sverdrup coming on stream is a momentous occasion for Equinor. Currently Equinor holds a 50% interest in the wind farm located in the German part of the Baltic Sea. The region remains the most promising in terms of estimated undiscovered oil and gas. At peak, this field will account for around one third of all oil production in Norway. RWE Renewables (following their takeover of E.ON Climate and Renewables) will remain the operator with a 50 % interest. Big finds are critical to justify expensive developments in an area that lacks the energy infrastructure of the North Sea.

The divestment demonstrates Equinor’s ability to realise value from the development of offshore wind projects. It can say disappointing, but you could also add the words ‘not surprising’ to that. First oil to Mongstad only a few days after production start confirms that the field is producing well. Johan Sverdrup is expected to generate income from production of more than NOK 1400 billion. Active portfolio management through the project life cycle is an important part of our offshore wind strategy. Equinor, in which the Norwegian government owns 67%, has been the most active explorer in the Barents Sea in recent years. Arkona was delivered under budget and on time and has had strong operational performance since start-up.

This is a historic contract in the oil and gas industry. Now the project is de-risked and in the early phase of operations. It is the first contract signed for the use of advanced wireless drone services. Company pleased to welcome Credit Suisse Energy Infrastructure Partners as new partner. IFRS net income was negative USD 1.11 billion. The transaction covers all of Equinor’s interests in the Eagle Ford Joint Venture with Repsol. Another explorer in the region, Lundin Petroleum AB, has said it will reassess its interest in the entire area if no major discoveries. The transaction supports Equinor’s strategy to optimise our onshore US portfolio, enhancing financial flexibility.

The Barents Sea has only two fields in production. Financial results impacted by lower prices and deferral of gas production to capture higher value. Production from the first phase of Johan Sverdrup started on 5 October, well ahead of schedule. Johan Sverdrup has expected recoverable reserves of 2.7 billion barrels of oil equivalent. Snohvit and Goliat. Equinor’s Castberg will start producing in 2022. The full field can produce up to 660,000 barrels of oil per day at peak. Final investment decisions have yet to be made for the most likely candidates for future projects. Offshore wind assets with prudent operators such as RWE Renewables are attractive to institutional investors.

Dodson says “It was always a frontier area, almost a virgin area; we sometimes forget that there was high geological risk on this”.

Dodson made his comments on the sidelines of Equinor’s annual Autumn Conference in Oslo. It powered with electricity from shore, the field has record-low CO2 emissions of well-below 1 kg per barrel. Company look forward to continuing our strong and successful partnership with them. Norway’s oil and gas production is set to drop by more than half by 2050 even if all existing opportunities are seized. The break-even price for the full-field development is less than USD 20 per barrel. Company delighted to invest alongside two of the most experienced offshore wind players in the sector. Saetre’s forecast goes far beyond official prognoses from the Norwegian Petroleum Directorate, the industry regulator.

WA-542-P is located west of the recent Dorado oil discovery. It expected operating costs are below USD 2 per barrel. This day also marks the start of a new phase as company prepare to bring Johan Sverdrup oil to the international market. The operator also expects cash flow from operations of around USD 50 per barrel in 2020. It expects oil and gas production to be 12% lower in 2030 than 2018 after peaking locally in 2023. The costs have been reduced by NOK 31.4 billion in 2019-kroner. The Equinor CEO’s comments were meant as a counter-argument to politicians. The block covers 4815 square kilometres and lies about 100 kilometers from the Australian coast. The climate activists are advocating for a planned shutdown of Norway’s oil and gas industry.

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