Statoil and its Johan Sverdrup partners awarded Aibel a US$1 billion contract for the engineering, procurement and construction for the deck of the drilling platform on the Johan Sverdrup field.
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Johan Sverdrup field. From Statoil. |
Norwegian engineering and construction firm Kvaerner delivered the first topsides for the project and had high hopes of winning the second Johan Sverdrup drilling topside contract. As a result of the loss, the company is looking at cutting jobs.
For this second topsides contract awarded to Aibel, the company says it will build the largest module, the main support frame (MSF), at the company's yard in Thailand. The drilling support module (DSM), which is the second largest, will be built at the company's yard in Haugesund. The final module, the drilling equipment set (DES), will be built by partner Nymo in Grimstad. Work on combining the three modules will start in the autumn of 2017. This will take place at the company's yard in Haugesund. The finished platform will be handed over to Statoil in 2Q 2018.
The contract is subject to approval of the plan for development and operation in 2015 by the Norwegian Parliament.
Johan Sverdrup is located on the Utsira High in the North Sea, 155km west of Stavanger and is one of the five biggest oil fields on the Norwegian continental shelf. The field is approximately 1900m deep, in 110-120m water depth, and covers about 200sq km.
Statoil says that as of 2015, investment costs for full field development are estimated to be in the region of $22.3-28.9 billion, with recoverable resources of between 1.7 and 3.0 billion boe.
Johan Sverdrup’s $15.4 billion first phase development includes four bridge-linked platforms, with power from shore, and three subsea water injection templates.
According to Wood Mackenzie's report titled 'Statoil FID on oil price defying giant– Norway's Johan Sverdrup' the field will cost $31 billion to develop and will produce 600,000 boe/d at its peak. Wood Mackenzie's proprietary valuation of the field is $11.2 billion with a Brent oil price breakeven of $41 a barrel and a 23% IRR.
The Johan Sverdrup partnership’s goal is to recover 70% of resources. At plateau production the field will account for roughly 40% of the total oil production on the Norwegian continental shelf. Start-up is planned for late 2019.
Kvaerner's loss leads to job cuts
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Johan Sverdrup. From Statoil. |
Kvaerner says that the company is looking to initiate further cost reductions after the loss of the second Johan Sverdrup contract that Kvaerner had strong ambitions to win.
In a statement, Kvaerner said that with today’s turbulent market it is difficult to estimate when new projects are expected to start up. In 2015, there are a few key contracts to be awarded and the drilling topside for Johan Sverdrup was one of these.
“The loss of this tender is disappointing as well as an illustration of how intense the competition for every contract is,” says Jan Arve Haugan Kvaerner president and CEO. “We take this as a signal to not only step up the cost reduction measures in Kvaerner but we will also evaluate if we have to change our execution model and increase the use of subcontractors.”
Haugan says that the scope of remaining contract opportunities in 2015 is not large enough to fill the capacity Kvaerner has in the topsides business area. “We are now going to discuss how we can handle this in the best possible way together with the employees and employee representatives,” says Haugan.
Kvaerner was already looking at cost reductions this winter as part of their ongoing work and said that the company expected some necessary staff reductions before the summer. With the loss of the Johan Sverdrup drilling topside tender, the need to start capacity reductions before the summer is strengthened. Kvaerner says that the size and pace of such reductions will however depend on how successful the company is in the competition for other contracts this spring.
Earlier this month, the partners submitted their development plan for Johan Sverdrup. Two plans for the installation and operation for the pipeline transportation system and power from shore solution will be submitted separately.
The Johan Sverdrup partnership consists of Statoil, Lundin Norway, Petoro, Det norske oljeselskap and Maersk Oil. Statoil is the operator for all the field’s phases.
Read more:
Johan Sverdrup - a historic field
Wood Mackenzie values Sverdrup field at US$11.2 billion
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