Swedish oil exploration and production firm Lundin Petroleum has dropped its capital spending budget 26% compared to 2016, but still expects a positive year as production at Edvard Grieg ramps up.
Lundin's exploration spending will drop 64% compared to 2015, at US$145 million, with five exploration wells planned across Norway and Malaysia, as well as appraisal well drilling.
Meanwhile, 2016 development spending is pegged at $935 million - a 12% drop on 2015. The the majority of the cash being is being spent offshore Norway, including on Lundin's share of Statoil-operated Johan Sverdrup field development, where inroads are being made into cost reductions. Cash is also being spent on continued development drilling on the Lundin-operated Edvard Grieg development, which has already achieved 85,000 boe/d, with its 100,000 boe/d plateau production expected this year, as well as infill wells on Alvheim. Some cash will also be spent in Malaysia, with one development well being drilled on the Bertam oil field.
Johan Sverdrup
On Johan Sverdrup, work will ramp up this year, with construction due to start on three steel jackets and three topsides. Construction of the first steel jacket for the riser platform and the topside for the drilling platform started last year. It is expected that concept select for Phase 2 of the mega-field will be decided this year.
The riser and drilling platforms are scheduled to be installed in 2018 and the processing and living quarter platforms are scheduled to be installed in 2019. The pre-drilling of development wells will commence during the second quarter 2016 and is expected to continue until 2019 when 17 production and water injection wells will have been completed. The project is on schedule for first oil in Q4 2019.
Lundin says: "Given the current market environment and optimization efforts, the project is achieving significant cost reductions compared to the PDO estimate."
Despite a string of dry exploration wells during 2016, Lundin has increased its proven and probable working interest reserves to 685 MMboe, up 292% compared to 2014, thanks to its share of the massive Johan Sverdrup field being included on its books as reserves for the first time.
Lundin also saw further reserves increases from the successful appraisal of the Edvard Grieg field during 2015, as well as positive reserves revisions to the Volund field partially offset by a negative reserves revision on the Brynhild field.
The production guidance for 2016 is 60-70,000 boe/d, with about 80% coming from Norway.
Exploration plans
Two wells will be drilled in Norway; the Fosen prospect in PL544 (WI 40%), which is currently drilling, and the Filicudi prospect in PL533 (WI 35%), which is still being considered by the partnership and would be drilled during the second half of 2016. The 2016 budget also includes re-entering the Neiden well in the southern Barents Sea drilled in PL609 (WI 40%) where, due to time-constraints, the main reservoir target was not reached during the 2015 drilling operations.
A further two operated wells will be drilled offshore Malaysia, targeting the Bambazon and Maligan prospects, the first of which has already been and the second is ongoing.
Lundin's 2016 appraisal program involves the re-entry of the successful 2015 Alta-3 appraisal well in PL609 (WI 40%) in the southern Barents Sea, work on the Johan Sverdrup field, development studies for the Luno II discovery in PL359 (WI 50%) and a development feasibility study for Alta and Gohta in PL609.
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