Norway's flagship Johan Sverdrup oil field seen declining from late-2024/early-2025: Aker BP

Europe's highest producing oil field, Johan Sverdrup, is expected to start declining in late-2024 or early-2025 -- earlier than expected -- amid increased signs of water production at some wells, executives at project partner Aker BP said Feb. 8.

The field operator, Norwegian state-controlled Equinor, had already flagged that Sverdrup, which has reached production rates of 755,000 b/d, was expected to go into decline at some point in 2024-25, but was reticent on the topic in public comments earlier in the week.

On stream since 2019, Johan Sverdrup has transformed production levels from the mostly declining North Sea, producing a relatively heavy, sour crude that is atypical in a basin known for light sweet crude. Production from the field currently accounts for around a quarter of all North Sea oil output across Norway and the UK.

Aker BP CEO Karl Johnny Hersvik, whose company is the second-largest partner at Johan Sverdrup, on Feb. 8 described the field as a "fantastic success story," with production almost 100,000 b/d higher than foreseen by the field development plan, and strong operational "regularity."

But questioned by investors on a call following publication of the company's Q4 results, he acknowledged the latest prognosis of when decline would start to set in was earlier than expected, and said the decline could initially be quite rapid, while stressing there was no impact on the 2.7 billion barrel reserve estimate.

"We assumed previously that we would be able to maintain the enlarged rate on Johan Sverdrup well into 2025. Now the operator has informed us that they might reduce this volume earlier, that is late-2024 or early-2025. There is quite a bit of uncertainty," Hersvik said, explaining a downward forecast for Aker BP's own production this year.

Equinor itself did not immediately respond to a request for comment.

Equinor "currently expects to be able to maintain the current elevated production level until late 2024 or early 2025," Hersvik said, adding that Equinor was "maturing" plans for infill wells and further subsea developments under a proposed third development phase targeting the "flanks" of the field.

Industry 'bread and butter'

"We are seeing water in some wells," Hersvik said, stressing that water production was related to individual wells and not a field-wide issue. "The behavior... is not an overall field water cut development, it's a well issue. We are in the course of 2024 putting another eight wells on stream on Johan Sverdrup, which will limit the issue as it's directly correlated," he said, adding there was no issue with the water-handling capacity of the facilities.

"The water handling capacity is at the moment significant and quite in line with what we expected and sufficient," he said, noting that some water injection facilities had recently been renewed and extending field production was the industry's "bread and butter."

However, "from a technical perspective you will see the largest depletion rates relatively speaking in the first few months after you go off plateau, but they will depend on water volume, on the increasing water volume, well stock etc. That's a pretty difficult assessment to make at this point," he added.

Aker BP chief financial officer David Tonne noted a suggestion the proposed Phase 3 project could come on stream in 2028, but stressed there would be continuous work to add wells before then. "This is about adding new wells and adding new well slots, so Phase 2 is continuous work... in order to make sure that we keep production as high as possible over the next few years," Tonne said.

Prices for Johan Sverdrup crude have been supported by the collapse in Russian oil supply to Europe and attacks on Red Sea shipping, which have impacted imports from the Middle East, although Hersvik noted that there had also been a resumption of Sverdrup cargoes of going to Asia recently after the "arbitrage" opportunity to send cargoes East had been "closed for quite a while."

Platts, part of S&P Global Commodity Insights, assessed Sverdrup crude at a 56 cent/barrel discount to the Dated Brent benchmark on Feb. 7.