After years of hesitation, consideration and re-consideration, the Norwegian oil company Tuesday announced that the Arctic oil project will become reality.

The Johan Castberg will be one of the biggest industrial projects in the Norwegian Arctic ever. About 49 billion NOK (€5 billion) will be spent on the development of the 450 to 650 million barrels of oil equivalent.

Although it was expected, the announcement is still big news from the company which in the course of 2017 has conducted a series of unsuccessful exploration well drilling operations in region, while a bit further south, oil company Eni has experienced serious problems with its Goliat project, a license in which Statoil has a 35 percent stake.

"This is a great day!" says Margareth Øvrum, Statoil's executive vice president for Technology, Projects and Drilling.

"We have finally succeeded in realising the Johan Castberg development. The project is central part of the further development of the northern regions, and will create substantial value and spinoffs for Norway for 30 years"

First oil from the project is scheduled for 2022, the company says in a press release.

An illustration shows a floating production vessel such as Statoil might use to develop the Johan Castberg prospect. (Statoil ASA)
An illustration shows a floating production vessel such as Statoil might use to develop the Johan Castberg prospect. (Statoil ASA)

Northernmost project ever

Johan Castberg is located on 72 degrees north and will the northernmost field in operation on the Norwegian shelf. The two other projects in the region, gas field Snøhvit and oil field Goliat, are located on 71 degrees north.

Major revisions of the project development scheme have been made since the company discovered the resources in 2011 and 2012.

The company first planned to invest up to 100 million NOK in a development, which included a land-based facility on the Finnmark coast. In the actual development plan, that facility is gone. Statoil intends to extract the resources with the help of a Floating Production, Storage and Offloading vessel.

Break-even at $35

Costs are cut about 50 percent and the field is now to be profitable at oil prices of "less than $35 per barrel," the company says.

"The field will be a backbone of the further development of the oil and gas industry in the North. Infrastructure will also be built in a new area on the Norwegian continental shelf. We know from experience that this will create new development opportunities," says Arne Sigve Nylund, Statoil's executive vice president for Development and Production Norway.

Contract for Aker Solutions

In addition to its submission of a plan for development and operation Statoil is signing a contract both for the Johan Castberg subsea system, and engineering and procurement management, both with Aker Solutions AS. The contracts have a total value about NOK 4 billion (€407 million).

The contract includes 30 wells, 10 subsea templates and two satellite structures.

Power from natural gas

Statoil has earlier made clear that it intends to apply a gas-fired power solution for the project.

"We have developed a highly energy-efficient solution involving use of gas turbines for power generation," Øvrum said in 2016.

The proposed power solution for Johan Castberg comes after Eni on several occasions has had to halt production at its nearby Goliat field following power outage. The Goliat is electrified by cable from land.