Red-letter day for Norway as Johan Sverdrup comes on stream

First oil from Johan Sverdrup – Norway’s sixth-largest discovery, with reserves of around 2.7 billion barrels – is a red-letter day for the partners and the Norwegian state. The decision to sanction the development was the country's largest final investment decision in more than 30 years.

And with production expected to continue until the 2060s, Johan Sverdrup is likely to be one of the last fields producing in the region.

Research analyst Jamie Thompson said: “Johan Sverdrup is many things: it is world-class, it is a company-maker, it will generate excellent returns almost immediately.

“But perhaps most strikingly, it was discovered in a mature basin, in an area thought to be fully explored. It will be held up as an example of how new thinking can defy traditional maturity metrics.

“The field will produce 660,000 barrels per day of oil at peak in 2024, accounting for 30% of Norwegian oil production.

“On a standalone basis, it will contribute US$58 billion to the Norwegian state through taxes and the state’s direct stake – and that is not taking into account future dividends through its 67% interest in Equinor.”

He added: “The partners all have a long-term commitment to grow in Norway. Cash flows from Johan Sverdrup will be reinvested in exploration, maximising recovery from the Norwegian Continental Shelf and (potentially) further inorganic expansion.

“But there is an elephant in the room. Since Lundin Petroleum struck oil at Johan Sverdrup nearly a decade ago, Norwegian exploration has fallen on hard times and the smaller average size of projects is increasingly evident.

“The next big fields due on stream are in the Norwegian sector of the Barents - an area where exploration has under-performed of late and there are larger questions marks over its viability.”

Thompson added: “But to write off Norway would be to forget the ignore the lessons of Johan Sverdrup’s discovery. Mature areas can still deliver world-class finds, you ignore them at your peril.”