Dividing interests

With stakes so high in Norway’s giant Johan Sverdrup oil field project — $170bn of anticipated future revenues, up to 3bn bl of oil equivalent of total resources, $15bn of capital expenditure (capex) for phase one alone, three licence areas and five stakeholders — there was always plenty of scope for disagreement between discovery and first oil in 2019.

And so it has proved, even leaving aside the technical complications of development in a harsh environment and a controversy over the supply of power to the field. On 12 February, Norwegian independent Det Norske unexpectedly published a brief statement hinting at differences between the partners over the unitisation of the field, which is expected to account for 25pc of Norway’s oil production at peak. “Det Norske is of the opinion that the ownership interests in Johan Sverdrup must be divided in a just manner, based on the actual values in the licences that are to be unitised,” said Det Norske’s communications director Rolf Jarle Broske.

Det Norske argues that oil in its licence areas has a higher value than reserves in some other parts of the planned development, because it will be cheaper to produce. If this is taken into account, rather than simple shares in licences, Det Norske’s shareholders will get a bigger slice of the lucrative pie.

Getting a higher stake in a development project can boost a company’s financing options — even if the project is years away from first oil. Higher stakes mean higher potential resources and higher future cash flow, which allows the company to get loans now with better terms. And, pertinently, Det Norske has been reviewing its financing this year, following the sharp drop in oil prices.

Johan Sverdrup is a combined discovery covered by three licences (see below). Det Norske holds stakes of about 20pc in two of the licences. Norway’s state-controlled Statoil operates the project, with stakes of at least 40pc in each licence. The other partners are Swedish independent Lundin Petroleum, Denmark’s Maersk Oil and Norway’s state-owned oil and gas holding company Petoro.

The day after Det Norske published its unforshadowed statement last month, Statoil did submit a plan for development and operations for Johan Sverdrup. But the unitisation issue was left unresolved and will now be decided by the Norwegian Petroleum Directorate and the government.

So far, it does not look like the unitisation dispute threatens the existing timeframe for Johan Sverdrup.

“It is quite possible for the [oil] ministry to approve the plan for development and operation (PDO) before the distribution of the deposits has been finally decided. The ministry has itself given up its original linking of these two questions by considering the PDO before the distribution has been agreed,” Det Norske chairman Sverre Skogen says in an unusually strongly worded open letter.

Skogen says the ministry “has been pushing for a distribution based on volume, rather than on value”, instead of being impartial. Oil minister Tord Lien strongly rejects any suggestion of partiality.

When the partners failed to agree on 12 February on how to allocate Johan Sverdrup’s resources, Statoil drafted a proposed unitisation (see below) that was supported by Lundin and Maersk. Det Norske did not agree to the proposal, while Petoro asked for more information. Several hours later, and after its questions had been answered, Petoro accepted the proposed unitisation, according to Lien.

“For the general public — and for Det Norske as the affected licensee — it would be interesting to know what ‘information’ Petoro was given by Statoil,” Skogen says.

But Lien insists that neither Petoro nor any other partner was forced to accept a specific solution. Petoro, which has a mandate to maximise the state’s take from licences, has promised to clarify its position this week.

Johan Sverdrup project shares by licence

Production license 501: Lundin Norway (operator, 40pc), Statoil (40pc), Maersk Oil (20pc)

Production license 265: Statoil (operator, 40pc), Petoro (30pc), Det Norske (20pc), Lundin Petroleum (10pc)

Production license 502: Statoil (operator, 44.44pc), Petoro (33.33pc), Det Norske (22.22pc)

Proposed unitisation

Statoil — 40.0267pc; Lundin — 22.12pc; Petoro — 17.84pc; Det Norske — 11.8933pc; Maersk — 8.12pc

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