Statoil Greenlights Arctic Offshore Oil Project

Statoil has given the green light to the biggest offshore project of 2017, a $6 billion development in the Barents Sea called Johan Castberg. The field is believed to hold about 450-650 million barrels of oil, which would be a significant boost to the Norwegian state oil company's portfolio.

Statoil will operate the Arctic facility in partnership with Eni and Petoro, and it will result in several large contracts for Norway's offshore supply chain. Statoil says that it has made great strides in bringing down costs in order to make Castberg economically possible. 

“Johan Castberg has brought challenges. The project was not commercially viable due to high capital expenditures of more than [$12 billion] and a break-even oil price of more than $80 per barrel. We have been working hard together with our suppliers and partners, changing the concept and finding new solutions . . . Today we are delivering a solid PDO for a field with halved capital expenditures and which will be profitable at oil prices of less than $35 per barrel," said Margareth Øvrum, Statoil EVP for technology, projects and drilling.

Statoil also announced the selection of Aker Solutions for the subsea production system and the design for the field's FPSO, which will be the largest in the Norwegian offshore industry. "Our early involvement and strong collaboration with Statoil have helped halve the development costs, enabling this strategically important project to move forward," said Aker CEO Luis Araujo. "The field is critical in further developing northern Norway as an oil and gas region."

However, the announcement comes at a time of change for Norway's position on the future of petroleum E&P. Government pension fund manager Norges Bank Investment Management Global – the largest stockholder in the world with $1 trillion in assets – announced last month that it has advised the state to sell all of its interests in oil and gas firms. "This advice is based exclusively on financial arguments and analyses of the government's total oil and gas exposure," said deputy governor Egil Matsen in a statement.