FACTBOX: Norway’s Castberg field startup advances Arctic oil frontier

Norway's state-controlled Equinor has launched production at one of the world's northern-most oil fields, Johan Castberg, adding a new, high-value crude grade to Western European supply and likely spurring interest in industry expansion in the Arctic.

The project, with reserves of 450 million-650 million barrels, is three years late starting up, with stormy weather affecting the final stages, and earlier construction work affected by the pandemic and welding quality issues.

However, production is expected to rapidly ramp up, and could reach the anticipated "plateau" rate of 220,000 b/d in Q2 2025.

Castberg is expected to produce for at least 30 years, and will significantly replenish supply from Norway, Western Europe's largest oil producer. Another 250 million-550 million barrels could be added to reserves based on exploration success nearby, according to the partners.

It comes as output from the flagship Johan Sverdrup field, which has sustained Norwegian production at 2 million b/d, is expected to start declining sometime after 2025.

The Castberg facilities could also become a stepping stone for the next Arctic project, further north, known as Wisting, with the platform useable for helicopter refueling and the project boosting the industry's expertise. However, there are still uncertainties over the Wisting field.

"Norway's ability to arrest declines will depend largely on the success of exploration in the next few years, especially in the Barents Sea," S&P Global Commodity Insights analysts said in a recent oil markets outlook document.

Trade:

The light sweet Castberg grade is expected to attract particular interest due to its specific character, which produces little vacuum residue. "We think it might be one of the most valuable crudes in the world when it comes to market [and is] likely to price a couple of dollars per barrel above Dated Brent," Spencer Welch, global head of midstream and downstream consulting at Commodity Insights, said, adding prices would become clearer once the first cargoes had been processed and evaluated by refiners.

Prices for indigenous Western European crude have been boosted by the outlawing of Russia's Urals grade since Moscow's full-scale invasion of Ukraine in 2022, with a European ban on Russian oil imports helping keep more North Sea crude in the region -- current US policy has created some uncertainty over sanctions.

Norway's Arctic crude has to travel longer distances to centers such as Rotterdam compared with other North Sea grades, although Northwest Europe is seen as the likely main market.

Prices:

Castberg is a light sweet crude, but somewhat heavier than comparable North Sea grades, having an API gravity of 34.7 and sulfur content of 0.16%. Of particular interest for refiners is the low volume of vacuum residue, helping maximize volumes of more valuable products such as kerosene, naphtha and gasoil, according to Commodity Insights analysts.

The Platts Dated Brent benchmark has averaged $75.70/b so far in 2025, but some more specialized North Sea grades are known to trade well above this benchmark.

Infrastructure:

The Castberg floating production storage and offloading vessel lies 240 km north of the Norwegian mainland, but south of the environmentally sensitive "marginal ice zone."

The development cost for the project -- at NOK 86 billion ($8.2 billion) -- is 75% over the original budget.

Castberg is the second oil facility in the Norwegian Barents Sea after the Goliat floating production, storage and offloading vessel. The latter was brought on stream by Italy's Eni in 2016, but prompted an inquiry into safety breaches by Norway's Auditor General. Eni subsequently formed joint venture Var Energi -- Equinor's main partner at Castberg.

Castberg faced heavy criticism from safety regulators over the poor quality of welding on the FPSO at a Singapore fabrication yard, particularly around the "moon pool" opening on the underside of the vessel used by divers for subsea work. Equinor has provided assurances on safety, describing the production vessel as one of the most "thoroughly examined" ships in the world.

Norway remains committed to industry expansion in the Barents Sea, despite mixed results from exploration so far, and questions over whether to build a gas export pipeline from the region, as well as intensifying opposition from environmentalists.

Neighboring Russia is prioritizing the "Northern Sea Route" between the Barents Sea and Asia for trade, taking advantage of reduced sea ice due to climate change. Russia has a number of Arctic oil and gas projects on stream or under development, including Arctic LNG 2 project, a target of international sanctions.

Equinor in 2024 unveiled a new emergency preparedness plan for the Barents Sea including adding a new all-weather search and rescue helicopter and three emergency response rescue vessels with oil spill response capability, as well as ocean and ice-monitoring enhancements.