Johan Sverdrup: Contracts ahead for Norwegian suppliers

November 3, 2014

The gigantic Johan Sverdrup field, described by Statoil as one of the most profitable industrial projects in Norway over coming decades, will provide enormous value, the company has said.

Construction of the first phase may lead to 51,000 man-years related to Norwegian deliveries, and the field may produce revenues amounting to NOK 1350 billion. The project will provide new knowledge, new solutions and new opportunities, Statoil, Norway’s largest oil company further says.

“Johan Sverdrup represents all we stand for as an industry and our faith in the future. This will be a gigantic project that will secure energy supply and jobs and result in substantial spin-offs and value for Norwegian society, the industry and the partnership behind the development,” says Arne Sigve Nylund, Statoil executive vice president for Development & Production Norway.

Johan Sverdrup is one of the biggest discoveries on the Norwegian continental shelf since the mid-1980s and ranks among the biggest developments in the years ahead.

The consultation period concerning the environmental impact assessment for the field and the power proposal will now commence.

Large Norwegian component

It is estimated that the first-phase development of the Johan Sverdrup field will create around 51,000 man-years nationally, of which as many as 22,000 are expected to be performed by suppliers in Norway and approx. 12,000 by their subcontractors.

Calculations show that 2,700 man-years will be created in an average year in the production phase, with 3,400 man-years expected to be created at peak field development.

Based on estimates from Agenda Kaupang it is possible for the Norwegian supplier industry to be awarded more than 50% of the assignments in the construction phase and around 90% in the operating phase.

“It is very important for the Johan Sverdrup development that the Norwegian supplier industry positions itself well for the opportunities lying ahead,” says Nylund.

A new chapter

According to a provisional estimate, total production revenues over 50 years may amount to as much as NOK 1350 billion. Of this amount, corporation tax alone will give the Norwegian state NOK 670 billion in direct revenue. Total investments for the first development phase are NOK 100-120 billion (2), while production will be in the range of 315,000-380,000 barrels per day.

Looked at from the perspective of 50 years, Johan Sverdrup will be a long-term project that several generations will bring to maturity and operate. The 200 sq.km. large field will be developed in stages. The partners are currently working on various development scenarios for the various phases in order to ensure that the first construction phase forms the basis for an overall, integrated development.

“We are planning for a stepwise field development with various installations tied back to a joint field centre. This will ensure continuity and comprehensive resource utilisation and also generate the greatest possible added value for our owners,” adds Nylund.

Depending on the future choice of capacities and technical solutions, an early estimate for full development indicates NOK 170-220 billion with daily production put at 550,000-650,000 barrels per day.

Johan Sverdrup is situated in mature acreage that has been thoroughly studied and where the most central environmental aspects are that the development receives its power from land; that produced water will be purified and re-injected into the reservoir; and that cuttings drilled with oil-based liquid will either be brought ashore, or purified and discharged offshore. This is in accordance with regulations and a permit will be applied for, Statoil says.

The environmental impact assessment forms part of the plan for development and operation that is expected to be handled by the Storting next year and expected to be prepared and agreed by the partners in the beginning of February 2015.