STAVANGER, Norway—Statoil ASA reduced the development cost for the first phase of its giant Johan Sverdrup project offshore Norway by 21% to NOK 99 billion (US$12 billion), while raising the full field development’s planned production capacity by unveiling an additional processing platform.

The Norwegian major’s CEO, Eldar Sætre, made the most of the international spotlight on Stavanger at the start of the biennial Offshore Northern Seas (ONS) conference and exhibition Aug. 29 to give an update on the four-platform initial project and future phases.

The 21% cut in the forecast capex for the project’s first phase represents a reduction of NOK 24 billion (US$2.9 billion) from when the original plan for development and operation (PDO) was submitted with an estimate of NOK 123 billion (US$14.9 billion).

It also means the operator and its partners have achieved a breakeven price of less than $25 per barrel (bbl) for Johan Sverdrup’s first phase. Contributing to this has been a focus on areas such as debottlenecking; and optimizing the Phase 1 processing facility, which has raised the production capacity from its original range--between 315 Mbbl/d and 380 Mbbl/d of oil—to 440 Mbbl/d. Other improvements came from higher drilling and well efficiencies and better project planning and execution.

Phase 1 production is scheduled to begin in late 2019.

Although Statoil confirmed the full field development’s schedule was delayed by about six months for further improvement work, the company still plans to bring the full development onstream in 2022. The PDO for Phase 1 originally called for project pre-sanction of future phases during 2016 and an investment decision by year-end 2017. According to the updated plan, the project pre-sanction will now be made in first-half 2017, with a final investment decision reached and the PDO submitted in second-half 2018.

With the extra processing facility added to the plan—a move that field partners agreed to, but which is still subject to formal approval at the pre-sanction stage—Johan Sverdrup’s eventual full-field production capacity is now put at 660 Mbbl/d. The original range was 550 Mbbl/d to 650 Mbbl/d.

Lower-end recoverable reserve estimates were also firmed up and raised slightly higher to between 1.9 Bboe and 3 Bboe, said Margareth Øvrum, Statoil’s executive vice president for technology, projects and frilling.

Improvement was achieved “by challenging every single element,” she added, noting Statoil saw full-field investment estimates fall from between NOK 170 billion and NOK 220 billion in 2015 to NOK 140 billion to 170 billion. This equates to between US$16.9 billion and $20.5 billion. This drops the full-development breakeven to less than $30/bbl.

“At the same time we want to stay on schedule for full-field production start and for establishing an area solution for land-based power by 2022, as per conditions stated in the approved PDO for Phase 1,” Øvrum said.

“It’s a massive project. We’re spending NOK 24 billion per year on it. But it is running to plan, and we have completed 31% of the first phase so far,” said Øvrum, who pointed out that more than 70% of the Phase 1 contracts went to Norwegian companies.

She also stressed that further reductions may be on the way. “We still see further room for improvement,” she said. “There’s no time to relax.”

Her words echoed an earlier comment from Sætre, who pointed out that the oil price was nearly $100/bbl on the opening day of ONS 2014.

“The low oil prices have exposed us all,” Sætre said. “We need a culture where we allow improvement, irrespective of where we are in the commodity cycle.”

Overall, the Johan Sverdrup improvements were the results “of good cooperation between Statoil, its partners and suppliers, he added. We are strongly reducing investment costs, and we are increasing the process capacity, resource estimate and value of the field. Johan Sverdrup is a world-class project, and we want to create high value for the owners and society for generations.”

The Johan Sverdrup project’s partners are Statoil (operator, 40.0267%); Lundin Norway (22.6%); Petoro (17.36%); Det norske oljeselskap (11.5733%); and Maersk Oil (8.44%).

—Mark Thomas