By Kjetil Malkenes Hovland
OSLO--Norway's government said Friday that the giant Johan
Sverdrup oil field in the North Sea requires an oil price of only
$32 a barrel to be profitable, as it asked parliament to approve
the $15 billion project at a time when many other similar plans are
being delayed due to low oil prices.
"This development is the largest industrial project in Norway in
recent times," said Minister of Petroleum and Energy Tord Lien.
Johan Sverdrup, operated by Norway's dominant oil and gas
operator, state-controlled Statoil ASA (STO), is the country's
fifth-biggest discovery. It will be the cornerstone of the
country's oil production and could contribute about 30% of Norway's
crude oil in 2025. Statoil had previously said the field was
profitable at an oil price below $40 a barrel.
The timing of the project is crucial, as it will create
thousands of jobs at the country's yards and oil-field services
companies, at a time when the sector is suffering from spending
cuts by global oil majors. Crude prices have plunged to around $65
a barrel from over $100 a barrel a year ago, ending an
industry-wide boom during a decade of upward-trending prices.
"Without this project, the situation in the Norwegian supplier
industry would have looked darker," Mr. Lien said.
Statoil said two months ago that it may delay several other
projects on its drawing board, including the Johan Castberg field
in the Barents Sea, as lower oil prices are threatening project
economics. The company is also squeezing its suppliers to achieve a
cost-cutting target of $1.7 billion as of next year.
Lower oil-sector spending this year is widely expected to slow
Norway's mainland economic growth to slightly above 1% from 2.3% in
2014. The oil sector employs about 9% of the country's workforce
and contributed nearly a fifth of its economic activity and 46% of
export revenue in 2014.
Johan Sverdrup is estimated to hold 1.9 billion barrels of oil
and will produce up to 377,000 barrels a day during its first
phase. It could produce more than 700,000 barrels a day during its
second phase, which is substantial, even compared with total global
oil demand of around 93 million barrels a day.
Statoil has estimated that the Johan Sverdrup project could
create a total of 51,000 domestic jobs between 2014 and 2026.
Oil-field service companies such as Aker Solutions ASA (AKSO.OS),
Kvaerner and Aibel have already been awarded some of the contracts.
The field's first phase includes four separate platforms linked
with bridges.
Johan Sverdrup is operated by Statoil with a 40.03% stake.
Partners include Lundin Petroleum AB (LUPE.SK) with 22.12%, Det
Norske Oljeselskap ASA (DETNOR.OS) with 11.89%, Maersk Oil with
8.12%, and Petoro AS with 17.84%.
-Write to Kjetil Malkenes Hovland at
kjetilmalkenes.hovland@wsj.com
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