Norway-focused Lundin sees gas output benefit from imminent Sverdrup expansion

Norway's Johan Sverdrup oil field expansion project is "firmly" on track for startup in the fourth quarter, with the provision of renewable power to the facilities set to enable higher gas sales from a number of North Sea fields, upstream company Lundin Energy said April 27.

In a results statement, Lundin, which is selling its core business to rival Aker BP, highlighted progress on the giant Johan Sverdrup Phase 2 expansion project, which will reinforce the field's role as a linchpin of North Sea supply, with crude capacity of 755,000 b/d following startup in the fourth quarter 2022. The startup will mean Sverdrup capacity rising to more than 40% of recent Norwegian crude output.

Sverdrup crude, which came on stream in 2019, is not part of the Platts Dated Brent price assessment, but has met with demand in Europe and Asia as a heavier, higher sulfur grade compared with traditional North Sea crude and a potential substitute for Russia's medium sour Urals.

Sverdrup has broadly tracked benchmark Dated Brent this year and was last assessed by S&P Global Commodity Insights at Dated Brent minus 90 cents/b on April 26.

Lundin discovered the field in 2010-11, while state-controlled Equinor is the operator and has led the development stage.

In Phase 2, "the drilling of the first subsea wells commenced in January 2022 and the Phase 2 topside processing platform and bridge connection were successfully installed offshore in March... All subsea flowlines have been installed with tie-back to topside facilities expected to take place in the second quarter of 2022. Phase 2 production start is expected in fourth quarter of 2022," Lundin said.

Gas boost

Lundin also underlined the role Phase 2 will play in bringing low-carbon electricity from hydropower facilities on Norway's coast to not only the Sverdrup platforms, but fields nearby such as Lundin's Edvard Grieg hub, in turn enabling greater gas supply to Europe's crisis-hit gas market.

The ground-breaking provision of power from shore via a 200 km cable to Sverdrup and on to other facilities should free up gas currently consumed at platforms for generating power, used for example by compressors and for making "process heat," a vital part of oil field operations.

With European gas supply in crisis due to the Ukraine war and Norway's role increased, it is one of a number of steps Norway is taking that should boost gas output.

Lundin's Edvard Grieg hub is primarily an oil producer, feeding the Grane heavy crude stream, but it also produces some gas for sale -- about 8% of total Grieg hydrocarbon output in 2021, according to figures from the regulator.

Sverdrup Phase 2 is also set to meet the power needs of Ivar Aasen, another heavy oil field linked to Edvard Grieg, as well as Equinor's Gina Krog oil and gas field, and will partially meet the electricity needs of the Sleipner field and nearby satellites, according to Equinor.

"Power from shore at Edvard Grieg is on track for completion in the fourth quarter of 2022," Lundin said. "The new electric boilers have been installed on the Edvard Grieg platform and the power cable has been pulled into the Johan Sverdrup Phase 2 platform. The company will benefit from a 10% increase in gas sales from Edvard Grieg and a significant reduction in CO2 emissions compared to current levels by the end of 2022 due to the removal of the gas turbine power generation."

Troll electrification

Separately, Equinor and its partners in the giant Troll oil and gas field submitted a plan in April 2021 for a partial electrification solution for Troll, which is Western Europe's highest gas producer, able to meet 7-8% of European demand. Progressive phases of Troll electrification are due to start operating in 2024 and 2026.

The UK aims to emulate Norway in tying oil and gas platforms to low-carbon electricity supplies, with minimizing emissions the driver, but increasingly a focus on maximizing energy self-reliance following the Ukraine war. However, progress is expected to be slower in the absence of a major new oil field development such as Norway's Sverdrup.

Analysts at S&P Global Commodity Insights see a growing move by Norwegian operators to prioritize gas for sale, sometimes at the expense of injecting gas to boost oil production, and expects Norwegian gas production to reach near-record levels over the summer, soon overtaking Russia as Europe's largest piped gas supplier.

"Greater production from Norway's flexible producers and higher oil-to-gas optimization will push exports to new highs, demonstrating Norway's willingness to step up and supply Europe in Russian absence," S&P Global analysts said in a recent research note. "Yet, with the vast majority of additional production coming from several key areas, there is a risk capacity bottlenecks could hinder deliveries."

Lundin, which is one-third owned by Sweden's Lundin family, said it expected the takeover of the bulk of the business, comprising its oil and gas operations, by Aker BP, to be completed on June 30. Lundin's production rose 4% on the year in the first quarter to 191,000 b/d of oil equivalent. Its net production from the Edvard Grieg area rose by 7% to 73,000 b/d of oil equivalent.

According to the Norwegian Petroleum Directorate, total Edvard Grieg area production in 2021 amounted to around 113,000 boe/d, including production attributed to other stake holders.