Statoil: Johan Castberg Development Put Off

Statoil as operator has recommended a delay of the investment decision for the Johan Castberg project in the Norwegian Barents Sea.

Statoil has continued to mature the resource base and development plans for the project. There are still uncertainties related to the resource estimate and investment level.

“In addition, the Norwegian government has recently proposed reduced uplift in the petroleum tax system, which reduces the attractiveness of future projects, particularly marginal fields and fields which require new infrastructure. This has made it necessary to review the Johan Castberg project,” says Øystein Michelsen, Statoil’s executive vice president for development and production in Norway.

The license partners earlier this year selected a development concept for the project, including a new oil terminal at Veidnes outside Honningsvåg in Finnmark county, Norway.

It has been announced that the state aid regulations will be used to enable onshore landing of oil and gas in Northern Norway, as in the Snøhvit project. However, these plans have not been specified and presented as part of the proposal which is now up for approval in the Norwegian parliament. State aid will require notification to and approval by ESA, which means significant uncertainty for the project at the present time.

“The updated project estimates and the new uncertainty in the tax framework has made it necessary to consider what consequences this may have for the development concept,” says Michelsen.

Statoil is now drilling four exploration wells in the area around Johan Castberg. The objective is to prove additional resources to add further robustness to a potential development. This is part of a wider campaign which also includes additional exploration wells in other areas of the Barents Sea.

Johan Castberg (PL 532) is located 240 kilometers north-west of Hammerfest in Norway. The field consists of the Skrugard discovery from 2011 and Havis which was discovered in 2012. Preliminary volume estimates are in the range of 400-600 million barrels of oil.

Statoil’s ambition of producing more than 2.5 million barrels of oil equivalents per day in 2020 remains unchanged, including the ambition of producing more than 1.4 million barrels of oil equivalents per day from the Norwegian continental shelf.

Statoil is the operator of production license PL532 with 50 % equity. The other partners are Eni Norge AS (30 %) and Petoro (20 %).