Statoil Says Sverdrup Output May Reach 650,000 Barrels a Day

Statoil ASA’s Johan Sverdrup oil discovery, set to become Norway’s biggest field, may see peak output reach 650,000 barrels a day, beating previous estimates.

Investments in the first phase, which will include four offshore installations, are seen at 100 billion kroner ($16.4 billion) to 120 billion kroner, lower than an earlier estimate from partner Det Norske Oljeselskap ASA, Statoil said in a statement today. The company plans three or four phases, with the second starting in 2022 at the earliest, Sverdrup Senior Vice President Oeivind Reinertsen said in a phone interview.

Discovered in two parts by Lundin Petroleum AB in 2010 and Statoil in 2011, Sverdrup renewed optimism in Norway’s oil industry after a decade of falling output from aging North Sea fields. The find, which may be the largest since Statfjord in 1974, could supply as much as 25 percent of Norway’s oil production 10 years from now and will produce for 50 years. At peak, it will have the highest output of any of the country’s oilfields since the early 1990s.

“The update is very positive, implies reduced uncertainty and should be a share price trigger, in particular for Lundin” and Det Norske, Teodor Sveen Nilsen, an analyst at Swedbank First Securities in Oslo, said by e-mail. “Indications for plateau production, recovery rate and capex are all better than we have assumed.”

Second Phase

Sverdrup is expected to reach an initial output of 315,000 to 380,000 barrels of oil equivalent a day one or two years after startup at the end of 2019 and peak at 550,000 to 650,000 barrels a day in the second phase, Reinertsen said. That compares with a September estimate of as much as 600,000 barrels a day, given by Lundin, which holds a stake in the field.

“This is historic,” said Arne Sigve Nylund, executive vice president for development and production in Norway, in the statement. “We have not made a concept selection for a field this size since the 1980s.”

Statoil estimated in December that Sverdrup holds as much as 2.9 billion barrels of oil equivalent even as it cut its resource estimate and delayed the start of output by a year. The recovery rate is seen at 70 percent, the company said today.

The first phase will involve drilling 30 to 50 wells, Statoil’s Reinertsen said. It is “premature” to provide investment estimates for the subsequent phases or say when peak production will be reached, he said.

Field Center

Investments in the first phase include the field center, wells, export solutions for oil and gas, as well as power supply, Statoil said. The estimate includes “contingencies and provisions for market adjustments” as well as measures for improved recovery, the company said. Powering from land will reduce carbon emissions from the Utsira High area by 60 percent to 70 percent, Statoil said.

The plateau production guidance is “a real positive surprise,” Andre Baustad Benonisen, an analyst at Danske Bank Markets, said in a note. “While it is not clearly stated, we believe the current resource estimate” is based on 55 percent recovery, he wrote.

Shares in Statoil fell 1.9 percent to 156.9 kroner as of 12:32 p.m. in Oslo.

Lundin gained as much as 5.3 percent to 127.9 kronor in Stockholm, while Det Norske jumped as much as 4.8 percent to 70.5 kroner, the highest intraday level in almost two months.

A.P. Moeller-Maersk A/S’s Maersk Oil and Petoro AS are the other shareholders in Sverdrup.

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