Johan Castberg pipe off menu

In doubt: proposed pipeline from Johan Castberg to onshore terminal at Veidnes

Statoil has postponed a final concept selection on its Johan Castberg field project in the Barents Sea by another year until 2015, stating that it has found insufficient resources to support an export pipeline to shore that was envisaged under the original plan

The state-owned operator confirmed an earlier report that more time is needed to finalise a development solution for the frontier Arctic field, which is likely to push back start-up to at least 2020 compared with an earlier tentative scheduled of late 2018.

Statoil now sees a decision being made next summer, having already shelved an earlier proposed $15 billion concept involving a semi-submersible production unit with pipeline to onshore terminal last year due to uncertainty over resource volumes, as well as commerciality and tax issues.

A five-well exploration effort carried out in the area around the discovery over the past year has “not proven enough resources in Castberg to make the field viable for supporting infrastructure including a pipeline to shore and a terminal on its own”, said Statoil’s development and production chief for Norway, Arne Sigve Nylund.

While the company is under state pressure to select a hub solution that would facilitate wider development of future finds in the frontier Arctic region, Statoil said “government support practices for this type of infrastructure also remain unclear”.

It would appear to plunge into uncertainty the economic viability of the pipeline-based concept, which is dependent on finding further resources to boost additional volumes of between 400 million and 600 million barrels of oil equivalent at the discovery that combines the Skrugard and Havis finds.

Statoil and its partners in production licence 532, which hosts the discovery, will now look to “mature a floating production, storage and offloading vessel”, while also continuing to evaluate alternatives involving a production semisub.

The operator stated the licence will also examine the possibility of a standalone oil terminal at Veidnes in the northern county of FInnmark, which could be used in combination with offshore oil loading.

“However, there are significant differences in costs between a concept based on bringing the oil to shore in a pipeline and a concept based on offshore oil offloading,” Statoil said.

Nylund said the licence partners will look to mature the technical development solution for Johan Castberg, as well as look at measures to cut costs while updating the resource basis, until summer 2015.

“The partners will also further assess the financial basis for an oil terminal at Veidnes,” he added.

Statoil, led by chief executive Helge Lund, has another two nearby prospects - Isfjell and Pingvin – lined up for drilling in the area this winter.

Statoil operates the field in production licence 532 with a stake of 50%, with partners Eni and Petoro on 30% and 20% respectively.

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