EQUINOR: Third Largest NCS Field Starts Up

7 January 2020 will be a momentous day for all at Equinor and all involved in the Johan Sverdrup mega project. His Majesty King Harald V will officially open the Johan Sverdrup field centre in the North Sea. Delegates, including Norway’s Prime Minister Erna Solberg and the Minister of Petroleum and Energy Kjell-Børge Freiberg, will join field centre personnel from Equinor and partner organisations Lundin Norway, Petoro, Aker BP and Total for lunch and a guided tour. Equinor is one of the world’s energy majors, based in Norway, developing projects globally, with 20,000 employees, and involved in oil, gas, wind and solar energy. “We’re shaping the future of energy,” is the company’s boast. Previously known as Statoil, the company changed its name to Equinor in May 2018 to better reflect its operations as its leads the way in a global shift towards new energy systems, relying less on oil and gas. Equinor is derived from ‘equi’, the Latin root of words like equality and equilibrium, and ‘nor’, which salutes the company’s proud Norwegian origins. “We’re becoming a broad energy company and need a name that’s relevant for our entire business, not just oil, especially if you bear in mind the future, with new energy forms and greater demands on carbon efficiency in production. That’s why it’s important for me as CEO to make sure we are as well equipped for the future as possible,” said CEO Eldar Sætre, discussing the new identity last year.

THIRD LARGEST
At a time of transition, away from only oil and gas towards a broad energy portfolio, Equinor is clear that oil remains a vital element in the company’s strategy. “Equinor will continue to invest in oil and gas—while transforming into a broad energy company,” said Sætre. Nowhere has this been clearer than at the Johan Sverdrup oil field in the Norwegian southern North Sea. Around 90 miles off the coast of Stavanger, Johan Sverdrup was discovered in 2010 and is one of the most exciting finds of modern times. Expected to hold up to 2.7 billion barrels of recoverable oil, at depths of 1900, the value attached the field is vast. Equinor estimates that, over the field’s 50-year lifespan, income could read NOK 1430 billion (depending on oil price). There will also be significant spin off for Norwegian tax revenues and employment opportunities. Johan Sverdrup is the largest field development project on the Norwegian Continental Shelf since the 80s and has been built through a network of global partnerships, with international best practice being re-established at every milestone. When fully operational, after Phase 2 is complete in 2022, 660,000 barrels of oil will flow to the Mongstad terminal through Norway’s longest and largest pipeline. Currently, Phase 1 is well under way and receiving much praise for its digitalisation, environmental impact, and efficiency. The field came on stream on 5 October 2019, a full two months ahead of schedule and NOK 40 billion below estimated cost.

ON STREAM
Production plateau for Phase 1 is expected to be reached in the summer of 2020 and record low CO2 emissions are providing an example for others to follow. “Johan Sverdrup coming on stream is a momentous occasion for Equinor, our partners and suppliers,” said Eldar Sætre. “At peak, this field will account for around one third of all oil production in Norway and deliver very valuable barrels with record low emissions. Johan Sverdrup is expected to generate income from production of more than NOK 1400 billion of which more than NOK 900 billion to the Norwegian state and society.” Getting the project to where it is today has taken significant investment – NOK 83 billion. The plan for development and operation (PDO) was approved in 2015 and all parties have been working with ferocious appetite to make progress each day. This has resulted in significant time and monetary savings. “Starting production months ahead of schedule helps realise additional value from the field and is fitting for a project that over the development phase has redefined excellence in project execution,” says Anders Opedal, Executive Vice President for Technology, Projects & Drilling in Equinor. “Close cooperation with our partners and suppliers has contributed to high quality in the execution phase, and has been a key part of the improvement story. And we’ve also made courageous decisions with new technology and digitalisation that we’re benefiting from today.” Phase 1 has been the results of 70 million manhours, and more than 12,000 people from across the globe working in tandem during a two-year construction period. “The qualification of new installations technology has reduced safety risk, saved more than two million offshore hours and shaved months of the development schedule. We have also invested in digital solutions and ways of working to boost oil recovery, optimise production and improve field operations, and these new ways of working have already saved at least one month in the execution stage,” says Opedal. Cooperation between many businesses, multiple Equinor divisions, governments, municipalities, and regulatory authorities cannot be underestimated. The result of this success has been the creation, and continuance, of mass employment at a time when the oil price was extremely unfavourable and the global trend was retrenchments. “Johan Sverdrup is a giant development, built across nearly 30 construction sites in Norway and globally, and the field centre assembled in the North Sea counts as one of the largest on the NCS. Sanctioned right at the beginning of the downturn in the oil and gas industry, it helped ensure activity for tens of thousands of people, especially in Norway, at a critical time for many,” says Opedal. Arne Sigve Nylund, Executive Vice President for Development & Production Norway highlights the importance of Johan Sverdrup to the wider Norwegian economy: “The field will be operated from Equinor’s offices in Stavanger, whereas base and helicopter services will be delivered from Dusavika and Sola,” he explains. “The oil transported from the field will also sustain activity at the Mongstad terminal outside of Bergen, and the gas will be exported to Kårstø. The importance of this field for both the national and regional economies in Norway cannot be overstated. “In the same year that Norway celebrates 50 years since the Ekofisk discovery in 1969, which started the oil and gas adventure in Norway, the start-up of Johan Sverdrup lays the foundations for another 50 years of industrial activity and value-creation on the NCS,” he adds.

FIRST OIL
One of the major successes for Equinor at Johan Sverdrup has been the reduction in CO2 emissions during production. The field is powered with electricity from shore and CO2 emissions are estimated at 0.67 kg CO2 per barrel. CO2 emissions reductions from the field due to power from shore are estimated at more than 620,000 tonnes per year, totalling more than 25 million tonnes of CO2 over the life of the field. After 2022, Johan Sverdrup will also provide power from shore to other fields on Utsira High, including Edvard Grieg, Ivar Aasen and Gina Krog. These project characteristics are important when it comes to the sale and marketing of oil, which Equinor handles through oil trading units in Stavanger, London, Singapore and the USA. First oil started flowing from Johan Sverdrup to Mongstad, near Bergen, on 21 October. The oil flows through a 283 km pipeline in the North Sea to the plant at Mongstad where it is stored in caverns before being exported to markets around the world. Irene Rummelhoff, Executive Vice President for Marketing, Midstream & Processing (MMP) in Equinor was delighted when the first oil started flowing. “This is a great day for Equinor and the Johan Sverdrup partnership,” she said. “First oil to Mongstad only a few days after production start confirms that the field is producing well. This day also marks the start of a new phase as we prepare to bring Johan Sverdrup oil to the international market. “Mongstad plays an important role in realising significant value associated with the field. At the same time, Johan Sverdrup triggers high activity at the plant and new opportunities for the future,” she adds. The first cargo of oil from Johan Sverdrup has already been sold to China International United Petroleum & Chemicals Co., Ltd. (UNIPEC). UNIPEC is part of the SINOPEC Group, one of the world’s largest refiners. The cargo left Norway aboard the Orpheas, via the Suez Canal, heading straight for China. The vessel contains one million barrels with a market value of around USD 60 million. “This is a big day for everyone who has worked for a long time on preparing Mongstad for oil from Johan Sverdrup. It has been a major effort involving plant modifications and completion of pipes. The work has been carried out properly and efficiently. As head of Mongstad I am proud of the great effort leading up to this day,” said Rasmus F. Wille, Vice President for the Mongstad complex.

FINANCIALLY SOUND
In July, Equinor concluded a deal with Lundin which saw it further increase its ownership stake in Johan Sverdrup. The agreement saw Equinor divest around 54.5 million shares in Lundin at a price of SEK 266.4 per share. Total consideration for the divestment of shares in Lundin amounted to around USD 1.56 billion. Equinor acquired a further 2.6% direct ownership share in the Johan Sverdrup field for a cash consideration of USD 910 million. Now, Equinor holds a 42.6% ownership share in the Johan Sverdrup field and a 4.9% shareholding in Lundin Petroleum. “Since 2016 we have more than doubled the value of our investment in Lundin. This transaction gives us the opportunity to capitalize on this value creation, and at the same time increase our direct ownership in the Johan Sverdrup field,” says Sætre. “Johan Sverdrup is truly a world class field. An increased direct ownership share gives us the opportunity to create even more value for our shareholders,” he adds. With the field coming on stream, and first oil reaching Mongstad, Johan Sverdrup is already generating value for shareholders, and providing quality oil with lower CO2 emissions than ever before. As an engineering demonstration and an example of a modern mega project, Johan Sverdrup is now setting the standards