June 11, 2020 / 7:36 AM / a month ago

UPDATE 2-Norwegian oil firms finally agree offshore development plan

(Adds analyst, investment forecast)

By Terje Solsvik and Nerijus Adomaitis

OSLO, June 11 (Reuters) - Equinor and Aker BP have struck a deal to bring one of Norway’s largest remaining offshore oil and gas fields online after years of wrangling over the development strategy and costs.

They said on Thursday that the Krafla, Fulla and North of Alvheim area, estimated to have more than 500 million barrels of oil equivalent, will be subject to joint investment with the construction of platforms and equipment due to begin in 2022.

The companies, which have long been gridlocked over the development concept, did not give a start date for production nor an estimate for the cost of developing the field.

SpareBank 1 Markets calculated it would need investment of 50 billion to 70 billion Norwegian crowns ($5.3 billion-$7.5 billion), with the first oil likely to come in 2025.

“As far as we understand, the agreement covers cost split between the licences, which likely eliminates the need for changes in the licenses’ owner shares and operatorships,” the brokers said in a research note.

The plan consists of one manned processing platform in the southern part to be operated by Aker BP and an unmanned platform in the north operated by Equinor, with options for several smaller satellites that can feed into the main units.

Before the breakthrough, Aker BP had been pushing for just one large centralised manned processing unit while Equinor wanted two smaller unmanned platforms.

The deal was announced just days after Norway’s parliament agreed to a set of temporary tax cuts for the oil industry in a bid to spur investment and save jobs threatened by cost cuts amid the coronavirus pandemic.

“The area consists of many licences and complex reservoirs that contains several oil and gas discoveries,” Equinor said.

“Developing these resources will have significant effect on the supplier industry when it comes to engineering, development and the operational phase,” it said.

Poland’s LOTOS Exploration and Production is a partner in the licences. ($1 = 9.3894 Norwegian crowns) (Editing by David Clarke)

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