Lundin Energy doubles down on Arctic oil with Wisting field purchase

Norway-focused Lundin Energy said Oct. 28 it was buying an additional 25% stake in the country's most northerly oil project to date, the 500 million barrel Wisting field, from Austria's OMV, in a vote of confidence for Norwegian energy policies.

In a statement, the Stockholm-listed company, a third-owned by the Lundin family, said it was paying $320 million for the stake in Wisting, which is viewed as one of Norway's most technically challenging oil projects, partly because it lies some 300 kilometers north of the mainland in a location that gets little daylight for part of the year. The purchase would lift Lundin's stake in Wisting to 35%, at par with state-controlled Equinor.

Lundin reiterated plans by the partners to submit a field development plan by the end of 2022 to take advantage of pandemic-related tax breaks, with the goal of starting production in 2028, one of a number of long-range projects expected to support Norwegian output into the 2030s.

The plans include a 300-kilometer cable from the mainland to the facility so it can operate using low-carbon energy, limiting emissions.

Lundin has been a long-time oil explorer in the Barents Sea, but has struggled to commercialize its finds, with the company deciding to put its Alta-Gohta discoveries on the "back-burner" in 2020 due to a lack of delivery infrastructure.

Currently, the Goliat field is the only oil producing field in the Barents Sea, due to be joined by the delayed 400 million-650 million barrel Johan Castberg field in the fourth quarter of 2024.

"Wisting will be one of the largest development projects in Norway over the next few years, becoming the next Barents Sea production hub," the company said.

Lundin noted it has exploration acreage in the vicinity of Wisting that could boost the project's resource base, estimating "unrisked prospective" resources in the exploration acreage at 500 million barrels of oil equivalent.

Equinor is responsible for development of Wisting, but was due to hand back the role of operator to OMV following production startup, reflecting OMV's role as the original discoverer of the field in 2013. Lundin said operating arrangements would be clarified in discussion with the energy ministry and field partners.

Norwegian policy

The purchase suggests confidence in Norway's commitment to long-term oil and gas development, even as the country aims to minimize emissions from the process of developing and extracting oil and gas deposits, partly by providing facilities with low-carbon energy from the hydropower-based national grid.

Norwegian oil policies are expected to remain broadly stable under the recently elected Labor Party-led government, albeit with some tweaks to the tax regime.

Lundin said the additional Wisting resources would on their own give the company a 190% reserves replacement ratio in 2021.

"The acquisition of an additional 25% working interest in the Wisting oil development solidifies the company's position in the Wisting area, which will become a core production area for Lundin Energy," it said.

CEO Nick Walker added: "The acquisition of a further stake in the high-quality Wisting development is a perfect example of how we look to supplement our organic growth strategy with opportunistic acquisitions, fitting our ambition to sustain the company long term... I am excited to have increased our position in Wisting, at a price which I believe is very value accretive to the business."

Also owning stakes in Wisting are state holding company Petoro with 20% and Japan's Idemitsu with 10%.