Equinor starts phase 2 of Norway's giant Johan Sverdrup oil field

Equinor has started output from the second phase of its Johan Sverdrup oil development offshore Norway, which will lead to a 40% rise in the giant field's capacity, the state-controlled company said Dec. 15.

"The entire Johan Sverdrup field is now on stream. This is a red-letter day for us and our partners... but also for Norway and Europe," Geir Tungesvik, Equinor's executive vice president for Projects, Drilling & Procurement. "Johan Sverdrup accounts for large and important energy deliveries, and in the current market situation, most of the volumes will go to Europe."

The expansion will help cement the offshore field's dominant role in Norwegian production. Since coming on stream in October 2019, Sverdrup has greatly boosted Norway's production prospects, offsetting declines at fields that have been in production for decades.

At plateau, the Johan Sverdrup field will produce 720,000 b/d, aiming to rise to 755,000 b/d, Equinor added. Total recoverable reserves from Sverdrup are estimated at 2.7 billion barrels.

The phase 2 project consists of a new platform, five new subsea systems, 28 new wells, a new module for the existing riser platform, and facilities to send power from shore to the Utsira High area.

Equinor sad the full-field development of Johan Sverdrup has a break-even price of less than $15/b. The Norwegian company is also considering a third development phase for the field which would aim to further increase reservoir recovery, rather than accessing new reserves.

Equinor holds 42.6% in the field and is operator, alongside Aker BP (31.6%), Petoro (17.4%) and TotalEnergies (8.4%).

Medium sour

Sverdrup produces a medium sour grade -- heavier and more sulfurous than typical North Sea grades -- that is similar in quality to Russia's Urals.

Urals typically has a specific gravity of around 31.1 API with a sulfur content of 1.7% while Sverdrup is heavier with an API of 28.7 but has a lower sulfur content at 0.81%.

With EU sanctions on Russian crude imports in response to the invasion of Ukraine, the Norwegian grade has seen greater interest from European refineries. Prior to Russia's invasion of Ukraine, the bulk of Sverdrup crude would flow east to China, but this is no longer the case.

Sverdrup recently reached its lowest ever discount to Dated Brent on Dec. 7 as European buyers shunned sour barrels and traditional Asian buyers switched to cheaper Urals cargoes.

However, local buyers have returned to the market with recent bids in the Platts Market on Close assessment process demonstrating a resurgence in Sverdrup differentials.

Platts assessed Sverdrup at a $5.535/b discount to Dated Brent on Dec. 14, according to S&P Global Commodity Insights data.

Urals was assessed at Dated Brent minus $35.10/b on the same day, its value having plummeted in the wake of EU sanctions and the G7 price cap introduced on Dec. 5.

Low carbon

Johan Sverdrup field is considered one of the least carbon-intensive upstream fields in the world, as it uses renewable energy to power operations rather than diesel generators.

The field receives power from shore through cables from Haugsneset north of Stavanger. "The first cable currently supplies the first four platforms on the Johan Sverdrup field with electricity. The new cable supplies the fifth platform and the rest of the Utsira High installations," Equinor added.

Crude from Sverdrup is transported by pipeline to Mongstad, while the gas is piped to Karsto.

The Platts Carbon Intensity Premium assessment for the Johan Sverdrup field was 1.64 KgC02e/boe in November.

The majority of North Sea crude is considered to be of low carbon intensity, coming from oil fields where upstream operations emit in the range of 0-15 kgCO2e/boe.

Carbon intensity is emerging as a key indicator in the oil industry, viewed similarly to the way the market looks at sulfur. A higher carbon intensity for a crude is likely to lower its value.

Platts Carbon Intensity values reflect the impact of greenhouse gas emissions from wellhead production to the storage terminal. This considers the production, flaring and venting, maintenance activities, production processing and transport to the storage hub.