Comment: Equinor’s New E&P El Dorado

December 12, 2019

Thinking Brazil: Equinor headquarters in Oslo, Norway (Photo: William Stoichevski)
Thinking Brazil: Equinor headquarters in Oslo, Norway (Photo: William Stoichevski)

It’s been quite a month for Equinor — new stakes in European wind; new Gulf of Mexico deepwater acreage; new frame contracts for major suppliers plus an endorsement from the International Energy Agency for its energy mix.

Not bad — oh, and an ongoing well that could lead to a fivefold increase in the company’s Brazilian oil production.

Criticized for not always following its more experienced peers, Equinor has invested heavily at home in order to invest — heavily — abroad. Its CEO, Eldar Saetre, has also been duplicating that model in the renewables market.

After widening its global hydrocarbon hunt, he’s growing wind interests in the North Sea in order to grow them elsewhere. There are new U.S. wind concessions won on local content bids tech successes, and there are new Polish wind stakes to go with new Scottish sites.  

The offshore operator has just announced it’s taking up a 50% stake in Polish wind park, Baltyk I, operated by Polenergia in the Baltic Sea. With seemingly well-oiled ease, the company has also announced that it has the supply chain for any work, wind or oil, and that statement is backed up by numbers crunchers Rystad, who say several Norwegian offshore contractors are ready to follow Equinor out to sea, just as they did for oil and gas.

Brazil “trigger”
Most all, it’s drill bit “luck” and reserves that bankroll Equinor, and the company’s long struggle to stay in Brazil — through rising costs, political turmoil and deepwater doubt — might now produce Equinor’s new El Dorado. In a letter to Norwegian DN, CEO Saetre sounded off on Brazil, suggesting current production of about 100,000 barrels per day might soon increase threefold — then fivefold — as the company is reportedly tracing a Brazilian goliath.

Analysts at SpareBank1 suggest the company may have discovered an oilfield larger than the Norwegian giant, Johan Sverdrup, the new nation-builder that’ll put another boat in the boathouse of average Norwegians. Petrobras’s Uirapuri well (Equinor 28%) is “Equinor’s biggest exploration trigger ever”, the SpareBank1 investor note suggests.

“Based on several sources, the estimates for oil at Uirapuri are between 7 and 10 billion barrels in the whole reservoir,” SpareBank1 analyst, Teodor Sveen-Nilsen is quoted as saying, before adding, “Producible reserves could then be around 3.4 billion barrels oil.”

Ocean wind
This reward for Equinor’s 18-year investment is just the start. It’ll likely yield a Brazilian exploration “bonanza” for a company and a supply chain that together have tested deepwater limits and have, this week, won $300 million in wind development work at the Hywind Tampen project — test bed, too, for Havwind, Equinor’s ocean wind park concept (a future deepwater earner).

Saetre writes that the next 10 years will yield about $15 billion in Brazilian investments, most of it in field development work, including production drilling.

So, after committing to and then writing down US shale assets; testing and being tested in the oil sands of Canada, Equinor may breathe easier about earning in Brazil. Much of the wind investments, too, are covered by Norwegian emissions tax proceeds and stately entities.

Whatever the subsidy, Equinor is expanding the realm of its profit-making from the North Sea and North America to Angola and Nigeria. Don’t be surprised if the latter one day become Equinor oil, gas and wind provinces.

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