Lundin takes a back seat on Sverdrup

Taking back seat: Lundin CEO Ashley Heppenstall

Swedish player Lundin Petroleum is conceding operatorship of the Johan Sverdrup field to larger partner Statoil, letting the Norwegian state-owned player remain in the driving seat of the giant North Sea field in the years ahead.

Statoil is working operator for the planning phase of the field, but was expected to be challenged by Lundin – which drilled the all-important Sverdrup discovery well in 2010 – for the leading role for the development and operation stages.

“Statoil has done a good job as working operator, the relationships are good, and I see no reason that they don’t continue,” both for the first and any later development phases, Lundin chief executive Ashley Heppenstall told Upstream on the sidelines of the ONS Conference in Stavanger.

“There is an expectation from the partnership that that is what is going to happen. They are the largest percentage owner in Johan Sverdrup, and this is the biggest project in Norway,” said Heppenstall. “You have to be pragmatic.”

The first phase of the Johan Sverdrup development is expected to cost up to Nkr120 billion ($19.4 billion), with production start-up in 2019. Estimated to hold between 1.8 billion and 2.9 billion barrels of oil, the field is to be developed in several phases over the next 50 years.

Statoil has been clear all along that it wants to keep the operator responsibilities both for the first and all subsequent phases of the field, which at its peak will account for 25% of Norway’s total oil production.

“We have the experience needed. Many of our giant fields in Norway – like Oseberg, Statfjord and Gullfaks – are off plateau production, and we therefore have many experienced people ready to take on the new challenge," said Oivind Reinertsen, senior vice president for the Sverdrup development at Statoil.

Having Statoil assume the operator’s seat on a permanent basis does not mean Lundin and the other partners will be any less involved, Heppenstall emphasized.

“One of the things that is healthy in Norway is that there is a strong input from all of the partnership,” said Heppenstall. “That is certainly the case with Sverdrup. It is not just Statoil driving the thing forward, there is a lot of input from ourselves and the other partners in terms of the final decisions.”

Choosing an operator is one of several decisions that Statoil and Lundin, along with partners Petoro, Det Norske Oljeselskap and Maersk Oil, have to agree on before a development plan is submitted next February.

With the operatorship seemingly settled, the group can concentrate on other issues, including the percentages each company should get of the unitised field. Johan Sverdrup straddles three licences, the largest two of which are currently operated by Statoil and Lundin, respectively.

Because of the field’s size, every tenth of a percentage point represents large values, boding for tough negotiations in the months ahead: “Everyone will fight for the best deal they can get,” said Heppenstall.

Having grown significantly in Norway in the past decade, Lundin is operator of the ongoing Brynhild and Edvard Grieg developments. The company has also had exploration success with the Luno 2 and Gohta discoveries in recent years.

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