• Floating production vessel due to leave Varg field in August
  • Remaining reserves are 8.7 million barrels of oil equivalent

Repsol SA plans to shut down its unprofitable Varg oil deposit in the North Sea, the first time a Norwegian field will be closed because of the crude-price collapse.

“Varg has been cash-negative since August 2015,” the company said in a Dec. 1 presentation to Norway’s Petroleum Safety Authority obtained by Bloomberg. Further investments in the field aren’t economical, it said.

Repsol acquired Varg as part of its $13 billion purchase of Talisman Energy Inc. in 2014. It has since terminated its contract with Teekay Corp. for the field’s floating production vessel, which will leave the area on Aug. 1, Grethe Elise Foldnes, a spokeswoman for the Spanish company, said by e-mail.

Repsol’s decision is rare. Even though oil prices have plunged 70 percent since mid-2014, only 0.1 percent of global production has been curtailed on the grounds that it’s become unprofitable, according to a report this month from consultants Wood Mackenzie Ltd. Most oil companies have sought to ride out the slump by reducing spending, cutting jobs and delaying projects.

One exception is A.P. Moeller-Maersk A/S, whose oil unit has sought approval from U.K. authorities to shut the North Sea Janice field in the second or third quarter, without giving a specific reason. Royal Dutch Shell Plc said at the end of 2014 that it might close its Draugen field in the Norwegian Sea a decade earlier than planned because of low prices, higher costs and a tax increase.

Varg, in which Repsol holds a 65 percent stake, started production in 1998 and has entered its so-called tail-production phase, though it was expected to operate until 2021, the Norwegian Petroleum Directorate said on its website. Remaining reserves are about 8.7 million barrels of oil equivalent, half of which is oil, according to the NPD.

The field, 30 percent owned by Petoro AS and 5 percent by Det Norske Oljeselskap AS, produced about 4,800 barrels of oil a day in November, according to the latest data. Regardless of the expected shutdown, it has been a “great success story” as total production has been more than triple the initial plan, Repsol’s Foldnes said. 

Offshore.no first reported the company’s intention to close Varg.

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