Aker BP begins early phase 2 output at Aerfugl gas field offshore Norway

London — Norwegian producer Aker BP said Wednesday it has started producing from a new well at its Aerfugl gas and condensate field in the Norwegian Sea, having brought forward the second production phase of the project by three years.

Aerfugl was first put on stream with a test producer well in 2013 and has since produced via the floating production, storage and offloading vessel at the Skarv field.

Originally it was planned for a first phase to develop the southern part of Aerfugl with three new wells and a start up in late 2020. This was to be followed in 2023 by phase two consisting of an additional three wells in the northern part of the field.

However, Aker BP opted to bring forward phase two after work to expand the gas capacity of the Skarv FPSO by 15%.

"Production has started from the first Aerfugl phase 2 well in the Norwegian Sea –- three years ahead of the original plan," Aker BP said.

"Due to work to increase the gas capacity on the Skarv FPSO, the Aerfugl project team optimized the phase 2 scope and identified existing infrastructure to host the first 'phase 2 well'," the company said.

A company spokesman declined to comment on the production rate from the first well.

The remaining two phase 2 wells will come on stream in 2021.

"The Aerfugl field development is adding five years lifetime extension to the Skarv FPSO and is an important part of the area development," Aker BP's vice president for operations and asset development in the Skarv area, Ine Dolve, said.

Skarv oil recovery

The Plan for Development and Operation for both phases of Aerfugl was approved by Norway's energy ministry in April 2018.

According to the PDO, Aerfugl's gas reserves are estimated at about 35 Bcm and the overall project cost at NOK8 billion ($750 million), the Norwegian Petroleum Directorate said Wednesday.

Export of gas from Skarv will be postponed so as to ensure capacity for the Aerfugl gas on the Skarv FPSO, which will contribute to increased oil recovery on Skarv, the NPD said.

"It is positive that utilizing existing infrastructure and redistributing production capacity contributes to both increased oil recovery and value creation," the NPD's assistant director for development and operations, Niels Erik Hald, said in a statement.

Aker BP operates the project with a 23.8% stake alongside partners state-controlled Equinor (36.2%), Germany's Wintershall DEA (28.1%) and Poland's PGNiG (11.9%).

Gas from the first well will be transported to the Skarv FPSO for treatment and then will be transported to the Karsto terminal through an 80-km (50-mile) pipeline connected to the Asgard transport system.

Other projects

Aker BP said that while the start of phase 2 production at Aerfugl was a positive development, its profitability would be "dramatically reduced in the current oil price environment."

Despite that, it said, it remains "one of the most profitable development projects on the Norwegian shelf" with a break-even price of around $15/b (converted from gas).

Given the current market conditions, Aker BP has also stopped all non-sanctioned projects, including the Hod redevelopment project in the Valhall area that was about to be sanctioned prior to the industry slump.

In late March, Aker BP announced a 20% cut in capital spending this year to $1.2 billion.

There was some good news in early April, however, when Aker BP made a new gas discovery close to the Skarv field with preliminary estimates placing the size of the discovery at between 1 Bcm and 2.4 Bcm of recoverable gas.

The well -- 6506/5-1 S -- was drilled about 50 km southwest of Skarv and encountered a total gas column of about 15 meters.

It was the first exploration well in production license 1008, which was awarded during Norway's 2018 mature area licensing round.