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Equinor takes over risky Arctic oil project from OMV

Increase font size  Decrease font size Date:2019-06-28   Views:98
Norway's state-controlled Equinor has signed an agreement with OMV to take over development of the Austrian company's challenging Wisting oil discovery in the Arctic, as the industry faces pressure over a previous botched oil project in the Barents Sea, Goliat.

In separate statements, the companies said Equinor would assume responsibility for the development of the 440 million barrel field, with OMV picking up as operator again once the field came on stream.
Wisting is considered to be at the limits of the industry's capability due to its location and geological conditions; before Wednesday's announcement, OMV had aimed to approve a development concept next year.

The field lies 310 km north of the coastal town of Hammerfest in an ice-prone location, with little or no daylight for part of the year. The water depth is 400 meters, and the reservoir is unusually shallow, at around 250 meters below the seabed, resulting in low pressure levels. It is thought the shallowness of the reservoir may heighten the risk of hydrocarbons leaking to the seabed when water is injected into the field. However, OMV has drilled six wells, prompting it in January to enthuse about the field's "increased potential."

Goliat, the only producing oil project in the Norwegian Barents Sea, has been heavily criticized since it was brought on stream by Eni in 2016, with Equinor facing criticism as the Italian company's main partner.

The criticism has centered on safety breaches and failures in regulatory oversight, the unusual cylindrical design of the platform, and claims that production was started up prematurely. Last year, Eni spun off its Norwegian business into a joint venture, with private equity-backed Point Resources known as Var Energi.

Equinor has noted it could face a lack of big Norwegian projects once its Johan Castberg project, in a more benign part of the Barents Sea, comes on stream in 2022.

"It is important for us to create value and maintain activity on the Norwegian continental shelf for many decades ahead, in close cooperation with other players," according to its executive vice president for Norwegian development and production, Arne Sigve Nylund.

OMV stepped up its Norwegian presence with a big asset purchase from Equinor (then Statoil) in 2013 as a way of increasing its presence in OECD economies, but has fairly limited offshore experience.

Wednesday's announcement also included a commitment to cooperate on developing the Hades/Iris gas and condensate discovery in the Norwegian Sea, estimated at 40 million-245 million barrels of oil equivalent, although OMV will continue as the operator.

Equinor holds the larger equity stakes in both Wisting and Hades/Iris, at 35% and 40% respectively, against OMV's 25% stake in Wisting and 30% in Hades/Iris.
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