delays Castberg, Snorre projects to cut costs

OSLO: Norwegian energy firm Statoil postponed two of its biggest offshore developments on Friday as low oil prices spur cost cuts, it said.

Statoil delayed the concept selection for the Arctic Johan Castberg project by more than a year to the second half of 2016 while a similar decision on extending the lifetime of the Snorre field to 2040, was also delayed a year.

"We have made significant progress in reducing costs for Johan Castberg," Statoil said. "However, current challenges in relation to costs and oil prices require us to spend more time to ensure that we extract the full benefit of the implemented measures."

Statoil had estimated Castberg, one of the world's northernmost oil finds, would cost around $15 billion while building a new platform at the Snorre field would cost around $4 billion.

Castberg, with up to 650 million barrels of oil equivalent, could cost over $70 per barrel to develop while the Snorre expansion could cost over $80 per barrel, analysts said. Brent crude currently trades around $60 per barrel.

"These projects were already on the watch list before the oil price started dropping and there has been quite a debate about both of them for a long time," said Kjetil Bakken, an analyst at brokerage Carnegie.

"On Castberg it's possible to bring the breakeven price down to around $60 per barrel," he said.

A final investment decision on Castberg is now scheduled for the fourth quarter of 2017 while production is expected to start in the fourth quarter of 2022.

Although Castberg is not seen as time sensitive, a delay at Snorre could jeopardise the entire project because the expansion depends on the lifespan of the field's other platforms, licence partners have said.

The new platform and other increased recovery efforts were seen yielding about 300 million barrels of oil at Snorre.