04 May 2023 | 08:23 UTC

UK Rosebank project 'very important' for energy security, industry: Equinor CFO

Highlights

Stresses tax, energy security benefits as FID in balance

Sverdrup capacity tests underway after teething problems

Gas prioritization means no plans to resume oil field injection

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The contentious UK Rosebank oil project is "very important," highly tax efficient and set to provide major industrial benefits, the chief financial officer of Norway's Equinor, Torgrim Reitan, said May 5, underlining hopes for a final investment decision in the face of political and environmental opposition.

The comments, made during the company's first-quarter results presentation, come as it weighs whether to proceed with the 300 million barrel project, in the face of opposition from some politicians as well as environmentalists, and amid industry concern at punitive tax rates.

Rosebank is seen as a test case for future North Sea investment amid a growing shift away from oil and gas. However, Reitan stressed the project's energy security benefits, alluding to a new gas pipeline link that would be built in the West of Shetland area and could benefit other projects.

Despite the UK's "energy profits levy" -- which raised headline taxes on oil and gas revenues to 75% -- Reitan highlighted investment allowances, worth 29% under the EPL, that can be carried over to other assets such as Mariner, a $7.7 billion project Equinor brought on stream in 2019.

Rosebank "is a very important project for the UK, for energy security in the UK and also for jobs and tax revenues," Reitan said.

"Rosebank investment enables us to credit that against other taxes in the UK, so it is a very tax efficient investment as such. But it will over time pay significant taxes back to the UK. It's actually GBP30 billion ($38 billion) in taxes and investments to the UK, so it is important for the UK oil and gas industry and for the country," he said.

He described Rosebank as one of two projects -- along with the Brazilian BM-C-33 gas condensate field -- on which Equinor aims to take a final investment decision "not too far into the future," going on to describe the Canadian Bay du Nord project as "a candidate... not as imminent as the two others."

Sverdrup testing

Reitan said Equinor was continuing facility testing at its largest producing oil field, Johan Sverdrup, to see if capacity can be raised from 720,000 b/d to 755,000 b/d, a level envisaged under the field's development plans, but which the company held back from.

Following startup of Phase 2 in December 2022, the Sverdrup project suffered problems with gas cooling equipment and manifolds, as well as vibration issues, however, these were fixed and the facilities "worked well in the latter part" of Q1 2023, Reitan said. "We are in the process of qualifying an increased total capacity for the field. It is 755,000 b/d that we aim for...We are in the midst of testing that," he said.

With the company prioritizing gas supply to Europe and gas markets still "rather tight," Equinor is not looking to reverse a 2022 policy of diverting gas to market that would normally be reinjected into oil fields to support their production, Reitan said, highlighting ultra-light crude field Gina Krog as one such field.

Heightened maintenance

While Equinor's Norwegian oil output rose 1% in the first quarter from a year earlier, to 641,000 b/d, it is planning significant maintenance shutdowns at a number of assets, including Troll, Ormen Lange and Aasta Hansteen, Reitan said, the latter two being primarily gas producers.

Across its global portfolio, Equinor expects a Q2 maintenance impact of 80,000 b/d of oil equivalent, including 59,000 boe/d offshore Norway, the company said, with the annualized figure remaining at 45,000 boe/d.

Equinor increased its oil output globally by 5% year on year in the first quarter to 1 million b/d on the back of the Sverdrup rampup and assets offshore the US and Brazil.

In its US unit, oil output grew 13% year on year to 129,000 b/d, reflecting improved "technical performance" and lower downtime at Caesar Tonga in the Gulf of Mexico, where Equinor increased its stake to 46% in 2019.

Oil output from Equinor's non-US international unit increased by 15% year on year to 231,000 b/d, driven by Brazil's Peregrino heavy oil field, following earlier technical problems and a boost from the startup of Phase 2 of the project.

Platts, part of S&P Global Commodity Insights, assessed Dated Brent at $72.51/b on May 3, down $4.67 day on day, reflecting the latest steep falls in financial markets and fears over the economic outlook.


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