Equinor weighs Phase 3 Sverdrup oil development as Phase 2 nears startup

Norway's Equinor is considering a third development phase for the giant Johan Sverdrup field as the second phase nears startup in the fourth quarter, the company's executive vice president for the Norwegian upstream, Kjetil Hove, said Aug. 30.

Speaking to journalists at the ONS conference, Hove confirmed Phase 2 is on track; output capacity is expected to rise to 755,000 b/d from 535,000 b/d once Phase 2 is online. Hove reiterated Phase 2 also encompasses some further infill drilling.

Since coming onstream in October 2019, the field has greatly boosted Norway's production prospects, offsetting declines at fields that have been in production for decades. The crude is a medium sour grade—heavier and more sulfurous than typical North Sea grades—but has been trading at a premium to Dated Brent for much of the time since March as crude markets shifted in response to the Russia-Ukraine war.

The mooted third phase would aim to further increase reservoir recovery, rather than accessing new reserves, Hove said.

Total recoverable reserves from Sverdrup are estimated at 2.7 billion barrels, although Equinor and its partners previously gave a range of 2.2 billion-3.2 billion barrels of oil equivalent.

Following almost three years of production, remaining reserves are now estimated at 2.2 billion barrels, according to the Norwegian Petroleum Directorate.

"On Sverdrup Phase 2, we are working hard to have a startup in the fourth quarter," Hove said. "With respect to investments, currently we're starting up Sverdrup Phase 2 and then as part of that we're going to drill quite a lot of subsea wells into ... Phase 2, and now we're already starting to talk about the next phase, which is Phase 3."

"That's infill drilling and so on, but there's a huge job to do to finalize Phase 2 before we can realize ... Phase 3," he said.

Phase 3 would target enhanced recovery within the previously stated range, Hove told S&P Global Commodity Insights.

"That's the intention with increased oil recovery efforts, to drill more wells and increase the reserve base—that's within that range," he said.

Asked about oil production from other fields, Hove reiterated guidance of a 5% annual "underlying" decline, noting Equinor had raised its Norwegian gas output by 18% year on year in Q2 in response to Europe's energy crisis, "which is really what we worked very hard to achieve in this quarter."

Equinor's Norwegian oil output dropped 5% on the year in Q2 to 576,000 b/d, partly because of maintenance at Sverdrup field in June, while its Norwegian gas output was up 18% at 767,000 boe/d.

Electrification price

Meanwhile, oil and gas operators are grappling with the issue of spiking Norwegian electricity prices as the industry moves to source power for offshore facilities such as Sverdrup from the country's hydropower-based grid to lower emissions.

The Sverdrup facilities are set to become an enabler as they feature a 200-km power cable from shore, with onward cables set to provide power to the Edward Grieg, Aivar Aasen, and Gina Krog fields. The Troll and Gjoa facilities are also among the facilities sourcing power from shore.

"It's a significant amount [of cost]. We're looking closely with our partners in these electrified projects ... into how we can optimize our situation in order not to be exposed to these high electricity prices," Michael Zechner, managing director at the Norway division of Germany's Wintershall Dea, told journalists Aug. 30.

He added that Wintershall Dea, together with some of its partners in Norway, is "looking into how we can bundle it together, how we can be more scalable with respect to providing electricity to our platforms."

Equinor is currently developing the Hywind Tampen wind project, which will provide dedicated electricity supplies to two oil and gas facilities: Gullfaks and Snorre.

Platts last assessed Sverdrup crude at a 75 cent/b premium to Dated Brent Aug. 26, having maintained a premium for much of the time since early March following curbs on Russian supply, notably of sour Urals crude.

Platts is a part of S&P Commodity Insights.