Johan Sverdrup plan 'torpedoed'

Rethink: on Johan Sverdrup electrification

Statoil and its partners look set to be forced to revise their plans for the giant Johan Sverdrup field off Norway after a powerful parliamentary committee on Friday demanded an area-wide power-from-shore solution for the Utsira High area.

The Energy & Environment Committee is understood to have instructed the Oslo government to require full electrification of Johan Sverdrup and three other fields – Edvard Grieg, Ivar Aasen and Gina Krog – from the outset of the Sverdrup development.

That is set to trigger a revision of the existing development concept for Sverdrup that envisages electrification of only this field in the first phase.

In November, Upstream revealed that Statoil and its partners had decided to scrap the plans for a central power hub on Johan Sverdrup to serve both this and the other Utsira High fields due to the high cost.

That decision caused uproar among opposition politicians as the government has ruled that new fields off Norway should be electrified from shore to curb carbon dioxide emissions from gas-fired turbines on platforms.

After months of torturous negotiations to arrive at a solution, it appears that Statoil and partners Lundin Petroleum, Det Norske Oljeselskap, Maersk Oil and Petoro will now have to go back to the drawing board on Johan Sverdrup.

This could trigger a further delay on the project, currently scheduled for start-up in late 2019, with Statoil estimating a one-year postponement could result in a loss of Nkr20 billion ($3.4 billion) in net present value.

The parliamentary committee is now demanding that power cables to connect the different fields are installed in parallel with the development of the first phase of Johan Sverdrup.

This would mean that Statoil’s plans to build a single 78 MW power cable to supply Johan Sverdrup would have to be scrapped.

Upstream understands that Statoil has already been in contact with supplier ABB about the possibility to increase the voltage in the cable.

The committee’s decision is likely to have a major cost impact for licence holders in the Utsira High area, according to petroleum economics professor Petter Osmundsen from the University of Stavanger.

"Possible consequences are project postponement, re-engineering and amendments and renegotiation of locked-in contracts. This may prove to be costly. Has parliament assessed these costs?” he questioned.

Norway’s Petroleum & Energy Minister Tord Lien has warned that a delay on Johan Sverdrup would risk further slippage in tenders for key fabrication contracts that would hit local contractors.

Aker Solutions’ executive chairman Oyvind Eriksen told Norwegian publication DN that “thousands of jobs” in Norway could be at risk in the event of a one-year postponement, with the country’s contracting sector struggling to find work after the earlier loss of lucrative contracts to mainly Asian yards.

His company has already been awarded the front-end engineering and design contract on Johan Sverdrup.

The committee’s decision reflects a majority consensus of opinion among the main opposition parties - Labour, Socialist Left, Centre and Greens - as well as the Christian People's and Liberal parties in favour of full-scale electrification from start-up of Johan Sverdrup.

However, Labour Party energy spokesman Terje Aasland was quoted as saying by the group was “certain this does not involve a risk of the project being delayed”, adding it was concerned that Norway achieved its 2020 goal for emissions cuts.

Environmental group Bellona celebrated the committee’s decision, with leader Frederic Hauge saying it could have consequences for people in senior positions at both Statoil and the Petroleum & Energy Ministry.

"The parliament has taken back the power of Norwegian oil politics from Statoil and the ministry. This is historic,” he told Upstream.

"I expect that heads will roll. The ignorance by Statoil about the Utsira High area has been scandalous. The company has not been honest and it has no more credibility. It is also the ministry’s responsibility as it approved Statoil’s behaviour.”

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