First oil from Johan Sverdrup to Mongstad

First oil from the giant Johan Sverdrup field in the North Sea arrived at the Mongstad plant north of Bergen. The field came onstream on 5 October 2019, more than two months ahead of schedule and NKr40bn ($4.31bn), or 30%, below the original estimate in the plan for development and operation (PDO).

Oil is piped from Johan Sverdrup, a distance of 283 km to the Mongstad complex where the oil is stored in caverns and prepared for shipping to markets all over the world. The first cargo is expected to leave for customers in Asia in late October, and will contain 1mn barrels with a market value of around $60mn at the current oil price, according to Equinor. Future cargoes are anticipated to contain between 600,000 and 2mn barrels. 

The Mongstad plant is expected to receive up to 440,000 b/d of oil from Johan Sverdrup when the first development phase reaches peak production. When the second phase is completed in 2022, Mongstad will receive up to 660,000 b/d. Once Johan Sverdrup is operating at full capacity, Mongstad will receive more than 30% of the total oil from the Norwegian Continental Shelf.

Equinor holds a 42.6% in Johann Sverdrup, partnered by Lundin Norway (20%), Petoro (17.36%), Aker BP (11.57%) and Total (8.44%). The field has expected recoverable reserves of 2.7bn boe. Powered with electricity from shore, the field has record-low CO₂ emissions of well-below 1 kg/b, reports Equinor.

Game-changing project
Commenting on Johann Sverdrup production, Ehsan Ul-Haq, Lead Oil Research Analyst at Refinitiv, says: ‘This is a game-changer for the North Sea and the global oil market. The expected yield is likely to be popular with complex refiners and has already attracted avid interest from Asian buyers especially from China and India.’

Johan Sverdrup oil is expected to have an API gravity of around 28, very similar to the Norwegian grade Grane, explains Ul-Haq. Its sulphur content is at around 0.8%, comparable to Forties. At the start of production, its quality is likely to be unstable, as is the case with other crudes when they come onstream. Based on its quality, it is expected to trade at values very near to Urals, although it may fetch some introductory discounts for its first shipments. While Urals has much higher sulphur contents than Johan Sverdrup, it is lighter than the Russian grade. According to reports, the crude has already traded at discounts of $0.50–1.50/b to Dated Brent on FOB (free onboard) basis, compared to a discount of $2.10/b to Dated for Urals CIF Rotterdam.

He continues: ‘Johan Sverdrup is expected to be popular with complex refiners, although it could also be blended with some sweeter crudes to produce IMO 2020 compliant bunker fuel. Its residual part is expected to have a sulphur content of more than 1.3%. Initial reports indicate avid interest from Asian buyers especially from China and India, although US refiners could buy it to replace Venezuelan barrels. Similarly, Mediterranean refiners with coking units are expected to lift the Norwegian crude. A UAE company, which has installed some crude distillation capacity to produce very low sulphur fuel oil (VLSFO), has reportedly shown interest in the crude.’

Refiners’ interest in Johan Sverdrup is in line with its yields. Its five-cut yields, which are generally used to find out the proportion of refined products the crude can produce in a simple distillation unit, shows a crude rich in middle distillates and fuel oil. The Norwegian crude is capable of yielding at least 13% jet/kerosene, 26% gas oil and 47% fuel oil, according to Refinitiv. Complex refiners in the US are likely to find the grade of interest due to its high vacuum gas oil (VGO) content, which they can process further to maximise gasoline output.

Mongstad plant
Photo: Equinor/Espen Rønnevik/Roar Lindefjeld, Woldcam