Statoil: Considerable Johan Castberg spin-offs

Statoil’s proposed impact assessment programme for the Johan Castberg project reveals that the project will be important to Norwegian industry and have strong ripple effects.

During our improvement work we have created new opportunities for the Johan Castberg field in the far north. We have changed the concept and found new solutions that allow us to realise the project. But we are still vulnerable to increasing costs and a continued low oil price,” says Margareth Øvrum, executive vice president for Technology, Projects and Drilling in Statoil.

The proposed impact assessment programme is an essential part of the preparations before a final development plan for Johan Castberg is submitted in 2017, according to schedule. The plan will present the development, relevant development solutions and expected impacts on other businesses and communities. The proposed programme is being sent to consultative bodies today to allow them to submit any issues for discussion during the consultation process related to the Johan Castberg impact assessment work.

“The Johan Castberg project may be a central project for further development of the NCS and in the far north. The field will provide significant tax income. The field development and operation will also create new opportunities for the industry throughout Norway and in North Norway in particular,” says Arne Sigve Nylund, executive vice president for Development and Production Norway.

Based on a spin-off report from Agenda Kaupang the Johan Castberg project, based on an investment estimate of between NOK 50 and 60 billion, will represent a significant part of NCS investments in the period 2018-2022. The first phase of the Johan Sverdrup development will be completed in this period. A continued low oil price may affect these plans.

According to Agenda Kaupang’s report the expected value creation in Norwegian supplies of goods and services to Johan Castberg amounts to NOK 29 billion, more than half of the project’s total investments. Value creation in North Norway during the development period is estimated to be NOK 1.7 billion.

“The Johan Castberg field will be producing for more than 30 years, and the major project spin-offs will be created in the long-lasting production phase. Castberg will trigger much activity for suppliers in North Norway and have ripple effects throughout Norway Norway, both in the development phase and the operating phase. In a normal year of operation the Johan Castberg field will generate 1200 man-years in Norway, of which 300 are expected to be in North Norway,” says Nylund.

Recommended power solution for Johan Castberg

Statoil has, on behalf of the licence, made an extensive analysis of possible power solutions for Johan Castberg. Aker Solutions, Aibel, ABB, Unitech, Pöyry and Thema Consulting have contributed to the power analysis. The power solutions include full and/or partial electrification based on power from land as well as gas-fired power.

Due to the long distance and technical challenges the cost of the measures related to partial/full electrification will be high, from just above NOK 5000 per tonne of CO2 to just above NOK 8000 per tonne of CO2. Investment costs for full/partial electrification will span from more than NOK 4 billion to just above NOK 12 billion. The Johan Castberg power solution effort reveals that costs related to land-based power, including technical challenges, represent a risk to both the timeline and feasibility of the project.

“We have developed a highly energy-efficient solution involving use of gas turbines for power generation on Johan Castberg. By use of heat recovery we achieve a turbine power efficiency of 64%, which is an outstanding result from use of gas turbines on offshore platforms. The licence partners consider gas-fired power to be the most suitable and socio-economic solution for the development,” says Øvrum.

Johan Castberg will be prepared for future electrification by use of alternating current technology in case this becomes an efficient and feasible solution in the future.

Emissions from Johan Castberg by use of gas turbines will be 0.27 million tonnes of CO2 per year, or 2% of current annual emissions from the NCS.

The proposed impact assessment programme covers only the offshore field development, not a possible terminal at Veidnes, which is a separate project with a separate timeline. Statoil is cooperating with the other licences on Wisting, Goliat and Alta/Gotha to secure sufficient volume and a profitable basis for a terminal.