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APPEC: Equinor's Johan Sverdrup crude a perfect fit for Asia's oil demand growth, low carbon goals


China's private refiners buy 14 mil mt Johan Sverdrup since 2020

Very low CO2 emissions in production, transportation

South Korea's refiners eager to enhance ESG profiles from feedstock

Norway's medium sour Johan Sverdrup crude is on course to becoming one of Asian refiners' most favored feedstock, as field operator Equinor's strategy to continue expanding upstream production while minimizing carbon intensity expected to help fulfill both Asia's oil demand recovery and green business practice goals.

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Equinor started production from the Johan Sverdrup oil field in the North Sea in the fourth quarter of 2019 and the Norwegian oil giant has already established a firm footing in the Asian export market, with multiple Northeast Asian refiners regularly feeding their units with the medium sour grade.

Since 2017, Equinor has managed to double crude supply to the East of Suez, more than 210 million barrels, or around 28.65 million mt, delivered to Asian customers in 2020, a 30% increase year on year, Simon James, vice president of crude trading and refinery optimization at Equinor, said during his presentation at the S&P Global Platts Asia Pacific Petroleum Conference Sept. 27.

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China's private sector refiners are currently Asia's most active customers of Johan Sverdrup crude, with close to 14 million mt of the medium sour crude received in Shandong province since January 2020 when the very first cargo of the grade arrived, according to market information collected by S&P Global Platts.

Among the top five Chinese buyers of Johan Sverdrup crude, Qirun refinery took 2.23 million mt since Equinor's Asia marketing of the crude kicked off in late 2019. Hualong refinery bought 2.07 million mt, while Qicheng, Hongrun and Jincheng refineries imported 1.41 million mt, 1.28 million mt and 1.26 million mt, respectively.

"These volumes indicate how important Asia is for Equinor," James said.

Equinor has strong commitment to energy transition and a lot of focus on renewables, but this is not an indication that the company will no longer be the traditional force in oil and gas, he added.

Even in a low-carbon scenario, Equinor estimates the world would still need new oil supplies equivalent to 20 times Norway's oil production through to 2035. With one of the world's lowest carbon emissions from production, Johan Sverdrup will become one of the important oil fields for securing enough energy for a growing world, especially Asia.

With a resource base of 2.78 billion boe, the 28 API, 0.85% sulfur Johan Sverdrup crude truly is a giant that could serve Asia's robust oil and energy demand growth post pandemic, according to James.

From its start up in October 2019, production has increased to 535,000 b/d as of May this year and continues its upward trend. The crude has found good homes in Asia with demand from Asian refiners and end-users exceeding company expectations, he said.

"With operating cost of below $2/b, it will be producing for decades to come. Studies have indicated that the full field capacity could be increased to around 755,000 boe/d."

Low carbon intensity

Processing crude oil with a very low carbon intensity such as Johan Sverdrup would be an effective way to promote Asian refiners' green business practice, Japanese, South Korean, Thai and Taiwanese refinery feedstock managers told Platts on the sidelines of the APPEC conference.

Johan Sverdrup field is powered by power from shore, which means that the field has the lowest CO2 emissions from production of any other oil and gas field in the world, according to Equinor.

Sweden's Lundin Energy, a partner in the Johan Sverdrup oil field, said June 16 that all future net production from Johan Sverdrup will be certified as carbon neutral produced by Intertek, under its CarbonZero standard.

Many South Korean refiners are eager to enhance their environmental, social and governance profiles from the feedstock procurement front, with GS Caltex recently purchasing 2 million barrels of Johan Sverdrup crude certified as carbon neutral at the point of production for delivery in September.

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Various Japanese energy and power companies have been active in picking up low carbon Australian Ichthys LNG and LPG cargoes, while two refiners are currently assessing their linear program models for potential adoption of Norwegian Johan Sverdrup crude as one of their feedstock options for the future, industry sources with close knowledge of the matter, but who declined to be identified, said.

"We will need to think low carbon in the crude market," James said.

He highlighted that CO2 emissions from the field are extremely low with estimates for the full field life below 0.7 kg of CO2 per produced barrel, sharply below the global field average.

As for marketing and trading, Equinor is rapidly working towards the next generation of low emission technology for shipping.

"We are continuing to develop our existing fleet, in line with our ambitious target of 50% reduction in CO2 emissions from our world-wide shipping and delivery activities by 2050. We already have eco-vessels among our fleet and we are investing in LPG-LNG dual fuel tankers," he said.