A Milestone for Northern Norway
Wednesday 11 April 2018
The Norwegian Government presented a proposition (draft resolution) to the Parliament (Stortinget) regarding the development plan for the Johan Castberg field. The proposition also includes a status for the petroleum industry.
Plan for Development and Operation (PDO) for the Johan Castberg field was delivered to the authorities 5 December 2017. Larger development projects on the Norwegian Continental Shelf are reviewed by Parliament before approval by the Ministry of Petroleum and Energy. Today, the Government presents a draft resolution that recommends approval of the development plan conditioned on certain terms related to sound resource management and safe operation.
Expected oil reserves for the Castberg field is estimated to 88,7 million Sm3, or 558 million barrels of oil. Planned production start is in the fourth quarter of 2022, and expected production period is 30 years. Total expected investments for the development of Castberg are 47,2 billion 2017-NOK. Expected net present value before tax with seven percent real interest rate is estimated to 74,4 billion 2017-NOK. The development project is profitable with oil prices above 31 USD/barrel.
The development of Castberg will generate substantial employment in Norwegian companies. The operator estimates 47 000 man-years in Norwegian companies in the development phase, distributed over the period 2017–2024. In the operational phase, the national employment effects are estimated to 1 700 man-years for a normal year.
The field development will generate positive spin-off effects in northern Norway both in the development and operational phase. Regional employment effects in the development phase are estimated to 1 750 man-years, including 700 man-years in the north of Troms and Finnmark. Annual regional employment effects in the operational phase are estimated to 470 man-years for a normal year, including 265 man-years in the north of Troms and Finnmark. The operator is planning to establish the operational organization in Harstad and a helicopter and supply base in Hammerfest.
Status for the petroleum industry
The proposition also includes a status for the petroleum industry on the Norwegian Continental Shelf. In 2017 oil and gas contributed 168 billion NOK in state revenue, or above 30 000 NOK per capita. About seven percent of total employment, or just below 200 000 people, were associated with the petroleum industry in 2016. The resource accounts indicate that about half of the total petroleum resources on the Norwegian Continental Shelf remains to be produced.
The resource additions from new discoveries have been low the past couple of years. Without new, larger discoveries going forward, the investment level will be reduced in the medium term. There is substantial interest from the industry for further exploration of the Norwegian Continental Shelf. In recent years, and especially after the oil price decline in 2014, a number of measures have been implemented in the industry to increase productivity and efficiency and reduce cost levels. The measures have given results and appear both in the form of lower investment costs for new developments, lower costs for production wells on producing fields and reduced operating and exploration costs. These are important measures to ensure the Norwegian Continental Shelf 's competitiveness.