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Oil

Equinor starts production at Johan Sverdrup oil field

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Equinor starts production at Johan Sverdrup oil field

Highlights

Eyes first-phase peak of 440,000 b/d by next summer

Heavier, sourer crude than many North Sea grades

Second phase to start in Q4 2022 and reach 660,000 b/d

London — Norway's state-controlled Equinor has started production from the 2.7 billion-barrel Johan Sverdrup oil field in the North Sea and should reach the first-phase peak of 440,000 b/d next summer, the company said Saturday.

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Sverdrup was originally scheduled to start production in December, but Equinor advanced the date to October. The field will reach maximum output of 660,000 b/d in its second phase which is set to start up in the fourth quarter of 2022.

Such high volumes from a single field have not been seen in the North Sea in years. The field is unusual for the North Sea in producing relatively heavy crude compared with regional norms, with an API gravity of 28. The new grade also has a sulfur content of 0.80%, making it both heavier and more sulfurous than Forties, the largest of five grades currently included in the basket that make up the Dated Brent benchmark.

Sverdrup is expected to load 15 cargoes of 600,000 barrels in November, with average loadings of 300,000 b/d, according to a copy of the loading program seen by S&P Global Platts earlier this week. Sverdrup, operated by Equinor, is set to become the largest producing oil field in the North Sea by mid-2020. There is one cargo of 1 million barrels and one cargo of 600,000 barrels in the revised October loading program.

REVERSAL

The impending startup will come as a relief to Equinor, which has seen its oil production from other Norwegian fields plummet in the last 18 months due to natural decline and technical glitches, partly offset by overseas projects.

Equinor has hailed the project as breaking new boundaries, including in the proportion of total crude that it expects to actually recover, which should reach 70%. It has also boasted repeated cost reductions.

The breakeven price for the full-field development is less than $20/b, the company said Saturday. After reaching a plateau for the first phase expected operating costs are below $2/b, Equinor added. The operator also expects cash flow from operations of around $50/b in 2020, based on a real oil price of $70/b, partly as a result of the phasing of tax payments in the ramp-up phase.

"At peak, this field will account for around one third of all oil production in Norway and deliver very valuable barrels with record low emissions," said Eldar Saetre, president and chief executive of Equinor.

The original Johan Sverdrup discovery was made in 2010 by Swedish-owned Lundin Petroleum, which still holds a 20% stake in the field, alongside Equinor's 42.6%. Total and BP have both taken minority stakes, BP indirectly through its Norwegian joint venture Aker BP.

-- Paul Hickin, paul.hickin@spglobal.com

-- Edited by Jason Lindquist, newsdesk@spglobal.com

European Shipping Seminar | November 27, 2019 | Athens, Greece

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