Norway’s Arctic Castberg oil project close to starting up: Equinor

Norway's Equinor is in the "final stages" of preparing to start up its northern-most oil project, Johan Castberg, a company spokesperson said Dec. 6, adding that structural issues identified earlier at the floating production, storage and offloading vessel had been fully addressed.

Delayed by two years due to the pandemic and problems with fabrication work in Singapore, Equinor has flagged an end-2024 startup date for the field, which is estimated at 450 million-650 million barrels and expected to produce for 30 years.

Equinor's Norwegian upstream vice president, Kjetil Hove, has said the field should ramp up to "plateau" production capacity rapidly, in the first half of 2025, as all wells initially envisaged have already been drilled.

"We are now in the final stages of preparing for operations," an Equinor spokesperson told S&P Global Commodity Insights.

The new light sweet crude stream should help stabilize Norwegian oil production levels -- the facility has a capacity of 220,000 b/d -- at a time when the boost provided by the giant Johan Sverdrup project in recent years is expected to start waning.

It also marks a step further north in Arctic waters for Western Europe's largest oil-producing nation.

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

Attractive quality

The crude is expected to attract strong prices due to its specific characteristics. It is somewhat heavier than other typical North Sea grades, with an API gravity of 34.7, and sulfur content of 0.16%. And because it will produce unusually low volumes of vacuum residue at the refining stage it could prove highly attractive in Europe.

"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.

First approved for development in 2018, the Castberg project has suffered repeated delays and cost over-runs, with the Petroleum Safety Authority (now known as Havtil) conducting a full investigation into problems with welding quality at a yard in Singapore not previously used by Equinor for such work.

In its 2021 report, the PSA said poor welding could not be compensated for by inspections and repairs, and inaccessible parts of the FPSO "will have a lower structural reliability than would have been the case."

However, a company spokesperson said that safety was Equinor's top priority and Johan Castberg is "a secure facility and a safe workplace."

"Extensive work has been carried out to cross-check welds, rectify errors, and perform additional inspections, making few ships as thoroughly examined," he said.

Barents expansion

Norway remains committed to oil and gas industry expansion in the Barents Sea, despite somewhat lackluster results so far from exploration, and intensifying opposition to the industry from environmentalists.

Castberg will be the second oil field to come on stream in the Norwegian Barents after the Goliat field, which is operated by Equinor's partner at Castberg, Var Energi, and which also sparked controversy over safety issues highlighted by the PSA in previous years.

The Castberg location, 240 km north of the mainland, is largely free of the floating ice seen in other far-northern locations. However, adaptations have been needed to cope with freezing conditions and long periods of darkness.

The project is also seen as facilitating the even more northerly Wisting oil project -- still at the planning stage -- for which the Castberg FPSO may act as a staging post, for example for helicopter flights.

Ahead of the startup, Equinor 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.

A preliminary loading program seen by Commodity Insights showed Castberg loadings should average 135,484 b/d in January as production starts to ramp up.