Equinor eyes oil growth but toughens emissions and renewables goals

Norway's state-controlled Equinor on June 15 underlined expectations for further oil output growth coupled with tougher emission targets by pledging 50% of its investment would be in renewables and low-carbon solutions by 2030.

In a strategy update fleshing out its net-zero goals, the company said it plans to broadly maintain oil and gas production at current levels up to 2030, with Norwegian output expected to grow in the next few years thanks to higher expectations for the giant Johan Sverdrup field as well as output from the Johan Castberg field -- due on stream in Q4 2023 -- before starting to decline around 2026.

Johan Sverdrup -- which came on stream in October 2019 and reached a first-phase capacity of 535,000 b/d last month -- is now expected to achieve 755,000 b/d once the second phase comes on stream at the end of 2022, upstream vice president Kjetil Hove said, adding production efficiency at the field had been 99% for the last six months. "Johan Sverdrup has gone from a world-class discovery to a world-class project and now into world-class operations," he said.

The company expects 2% annual average growth in its Norwegian upstream production from 2021-26, with more than 700,000 boe/d of new capacity due on stream over the period.

The Equinor-operated Oseberg and Troll fields are key components in the Platts Dated Brent benchmark.

The company also said it has 1.7 billion boe in potential Norwegian projects it could approve for development and sees potential for another 1.5 billion boe of production from enhanced oil recovery investments.

Slimming down

Overseas, Equinor said it is slimming its portfolio, scaling back further in US shale and exiting positions in Australia, Mexico and Nicaragua, but underlined expectations for several new oil projects. These include the second phase of the delayed Peregrino heavy oil field offshore Brazil, the 220,000 b/d Bacalhau project offshore Brazil, for which a development decision was taken in early-June, and the Bay du Nord project offshore Newfoundland, Canada. A final investment decision is being prepared for the Canadian project.

Outlining Equinor's involvement in 15 international projects at various stages of progress, Al Cook, the company's international upstream vice president, said: "In a world where we expect oil demand to decline in the 2030s these projects deliver value during the 2020s. These projects high-grade our projects in value and high-grade our projects in carbon."

Cook said the company was also scaling back international exploration, with a two-thirds reduction in the number of countries where it is exploring since 2017, as it focuses on exploration with faster payback in locations such as Angola and the Gulf of Mexico. "We're moving from the frontier to the familiar, we're moving from exploration for reserves to exploration for profit," Cook said.

On Peregrino, where phase one production has run into technical problems and operations have been hampered by the pandemic, Equinor said production would resume next year, with a second phase also due on stream next year.

The Bacalhau oil project offshore Brazil is due on stream in 2024, with production reaching 220,000 b/d in 2025, and should break even at under $35/b, Equinor added.

Equinor expects to achieve an average return on capital employed of 12% throughout the current decade, with projects due on stream up to 2030 breaking even at oil prices of less than $35/b.

Renewables spending

Equinor said the carbon intensity of its upstream production would be reduced by 25% by 2030 to 6 kg/b of oil equivalent produced, and its own upstream operations would be carbon neutral by 2030, with remaining emissions in that year compensated by trading and offsets.

The strategy sets more precise carbon goals, particularly for so-called Scope 3 emissions resulting from the consumption of Equinor's products rather than merely the production process. It now aims to reduce its net emissions including Scope 3 emissions by 20% by 2030 and 40% by 2035, on the way to 100% in 2050.

The pledge to direct 50% of capital expenditure by 2030 to renewables and low-carbon projects such as carbon capture and storage compares with a 12% allocation this year and just 4% in 2020.

The company expects to spend $23 billion on renewables projects in the half decade from 2021-26 and to achieve 12-16 GW of installed renewable capacity by 2030, based on its equity share in the facilities.

And by 2035, it aims to manage 15 million-30 million mt of CO2 transportation and storage capacity, again on an equity basis, and to supply hydrogen from 3-5 industrial clusters. Its carbon capture and storage projects are now due to move beyond Norway and the UK to potential projects in North America, Cook said.