Norway’s Statoil ASA has announced a green light for a NOK 49-billion (US$6-billion) offshore oil project in the Barents Sea, not long after taking victory laps for bringing an offshore wind project in the UK in under budget and hitting its climate targets two years ahead of schedule.
Less than a year ago, the state-owned enterprise declared it was “rebalancing its business model so far toward renewables and cleaner fossil fuels that the company’s value would rise even if the world’s governments took drastic actions to limit carbon emissions,” the Wall Street Journal reported at the time. But earlier this month, the company’s focus was on the world’s biggest new offshore oil project launched this year.
With an estimated resource of 450 to 650 million barrels of oil, the massive Johan Castberg project “is a boost to a region seen as key to arresting a decline in the country’s production,” Bloomberg reports, and “the decision comes at a critical time for the industry’s Arctic ambitions. The Barents is thought to hold about half of Norway’s undiscovered oil and gas, yet Norwegians are increasingly debating whether further exploration makes moral or financial sense amid efforts to fight climate change.”
So the country’s ostensibly climate-friendly fossil company decided this was the time to put a rather large thumb on the scale.
The Castberg oil deposits were discovered in 2011, but production was delayed by crashing oil prices. The project is the second approved in the region, but the work so far has not gone smoothly.
“The first, Eni SpA’s Goliat field that started production last year, has come under intense scrutiny following delays, cost overruns, and safety mishaps,” Bloomberg notes. “The government is also facing a lawsuit from environmental groups challenging Barents licence awards.”
The Bloomberg coverage focuses largely on Statoil’s successful effort to cut the cost of the Castberg project by half, delivering a break-even price of US$35 per barrel rather than $80. “Even if this is the Arctic and everyone thought this would be extremely complex, with high costs, we’re showing that we’re getting robust profitability,” said Margareth Ovrum, Statoil’s executive vice president for technology, projects and drilling.
“I’m proud of that.”