Statoil announced it will delay an investment decision on its Johan Castberg project in the Norwegian Barents Sea due to unease regarding recent move by the Norwegian government to increase taxes on oil and gas producers.
In addition to the tax rise, Statoil expressed concerns related to the resource estimate and investment level. The company is currently drilling four exploration wells around Johan Castberg with the objective of proving additional resources. Statoil and its partners Eni Norge AS (30%) and Petoro (20%) had recently selected a development concept for the project, which would consist of a floating production unit connected to shore via pipeline, and a new oil terminal at Veidnes. The partnership anticipated first production by 2018.
"The Norwegian government has recently proposed reduced uplift in the petroleum tax system, which reduces the attractiveness of future projects, particularly marginal fields and fields that require new infrastructure," says Øystein Michelsen, Statoil's executive vice president for development and production in Norway. "The updated project estimates and the new uncertainty in the tax framework has made it necessary to consider what consequences this may have for the development concept."
Norwegian Oil Minister Ola Borten Moe told Reuters that he believes the $15 billion development will be built. "It is an important project for Norway, and for Statoil as well," he said to the news service.
Johan Castberg, inside production license PL532, is located 240 km northwest of Hammerfest, Norway, and 100km north of Snovhit field. The field consists of the Skrugard and Havis discoveries, found in 2011 and 2012, respectively. The two discoveries are located approximately 7km apart. Preliminary volume estimates are in the range of 400-600 million barrels of oil. Statoil operates PL532 with 50% interest.
News of the delay comes as the Norwegian Petroleum Directorate (NPD) announced that Statoil discovered oil near Vigdis and Snorre in the Northern portion of the North Sea at well 34/7-H-2 H inside license PL089.
The well, which was drilled by the Bideford Dolphin drilling facility to 2,546m vertical depth, encountered a 24m oil column in the Cook formation. The NPD said the reservoir was poorer quality than than expected. The size of the discovery is still being assessed, and will be evaluated to determine whether it is commercially viable. Statoil's partners on PL089 are Petoro, ExxonMobil, Idemitsu, and RWE Dea.
Image credit: Statoil