Via Financial Times

In the middle of the North Sea, four metal platforms perched on yellow supports and weighing 100,000 tonnes sit above more than $100bn of black gold. 

The Johan Sverdrup field, located in Norwegian waters not far from the border with the UK, does not officially open until January, but has already polarised opinion. For proponents, it marks nothing less than the revival of Norway’s oil industry; for critics, it is an environmental tragedy that shows just how hard climate change will be to stop. 

“Johan Sverdrup very much represents the future of Norwegian oil,” said an enthused Arne Sigve Nylund, head of development and production in Norway for Equinor, the state-controlled oil major that is the field operator. 

Situated in one of the first licences handed out on the Norwegian continental shelf more than half a century ago, Johan Sverdrup holds about 2.7bn barrels of oil and, only a few weeks after its unofficial start-up, is already the largest producing field in western Europe. 

But perhaps its biggest selling point for both Equinor and the Norwegian government is that it is powered by electricity from shore, rather than the usual gas turbines, making it a flagship for their argument that if the world still needs oil for decades it would be best to have it from sources that have the lowest carbon emissions. 

“It’s an incredibly important project for Norway. We are, on average, best at getting oil out with the lowest emissions,” said Kjell-Borge Freiberg, Norway’s oil minister. He added that carbon dioxide emissions per barrel from Johan Sverdrup were just 700g versus a global average of 18kg. 

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As one of the largest finds anywhere in recent years, the fortunes of the Johan Sverdrup field are being closely watched by other oil groups. But for all the jubilation, there are still big questions about western Europe’s biggest oil industry, not least due to environmental pressure.

“Johan Sverdrup is a field that should never have been planned or opened. It is yet another field that prolongs the problem,” said Silje Lundberg, head of the Norwegian Society for the Conservation of Nature. 

Could Johan Sverdrup be the last big North Sea oilfield to be developed? 

Few expected such a discovery in 2010 when Lundin Petroleum, the Swedish independent oil group, struck oil in the North Sea. But it soon became apparent it was a giant field, one that promises to earn about NKr900bn ($102bn) for the Norwegian state over its 50-year lifetime. 

In a sign of its importance to Norway — where oil production has been falling steadily since the turn of the century — the official opening on January 7 will be attended by both the king and prime minister. 

The field will produce about 450,000 barrels per day of oil from next summer and at its peak, after a second phase of development, should reach 660,000. The project has a break-even cost of under $20 per barrel after a mini-crisis in the oil industry in 2015 allowed Equinor to push through big cost reductions. 

Opinion is split on the likelihood of further big finds in the North Sea, given just how much exploration has been done in both Norway and the UK over the last five decades. 

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Rune Nedregaard, head of the Johan Sverdrup project and an Equinor executive, said: “To be sure, we are talking about smaller and smaller finds going forward. If you had asked me prior to finding Johan Sverdrup, I would have said there was no chance [of a big discovery]. The chances are smaller and smaller.” 

Mr Nylund is more reserved, saying merely “we must be humble and hope”. He argued that such fields would be part of the energy future even as the world moves towards more renewable power. 

“We have fields here that will produce for at least 50 years into the future. When you look into the energy forecasts, there will still be a need for oil in 2050. We have a part to play, to be part of the solution with low-carbon oil production,” he added. 

Norway’s government is going full steam ahead, even as oil production figures are close to three-decade lows (much of the country’s recent production has been gas). It handed out a record number of exploration licences earlier this year and has hopes not just in the North Sea but also inside the Arctic Circle with the Barents Sea. More than half of Norway’s oil reserves remain in the ground, according to the country’s petroleum directorate. “If we explore, we will find,” said Mr Freiberg. 

Jamie Thompson, a research analyst at energy consultancy Wood Mackenzie, argued that Norway had returned to levels of exploration seen before the 2015 downturn, bucking the global trend. Thanks to its generous tax rebates for exploration and an increasing number of Norway-focused companies such as Equinor, Lundin and Aker BP, he refused to call it the last big discovery. 

Map showing Johan Sverdrup field in the North Sea

“If Norwegian companies continue to explore and take risks, there’s nothing to say they can’t find more. To write off Norway in that regard would be to write off Sverdrup itself,” he said. He pointed to the Glengorm discovery on the UK side of the North Sea earlier this year — the largest find there for a decade, albeit with one-tenth of the reserves of Johan Sverdrup. 

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The big unknown is how efforts to limit global warming under the Paris agreement to 1.5-2 degrees will affect both the supply and demand for oil. Equinor remains optimistic that its oil and gas will be competitive for decades to come, and is also ploughing money into offshore wind. 

But Ms Lundberg, who claims electrifying Johan Sverdrup is mere “greenwashing” as most of the emissions come when the oil is burnt not produced, argued that oil must be left in the ground to reach the Paris targets.

Mr Nylund, overlooking the grey waters of the North Sea in the fading December daylight, unsurprisingly does not agree but is also not as gung-ho as oil executives once were in an industry where projects such as Johan Sverdrup are meant to last half a century or more.

“We don’t think it’s a good idea to close down production of hydrocarbons prematurely. We still have a part to play. But it’s pretty hard to predict 30 years into the future,” he added.