Dec. 5 (UPI) -- By cutting the break-even cost by more than half, Norwegian major Statoil said it's decided on a development plan for the mega Johan Castberg oil field.
Johan Castberg is located in the Norwegian waters of the Barents Sea and holds at least 450 million barrels of oil equivalent. Statoil said Tuesday it submitted a plan for development and operation to the Norwegian government that outlines an annual cost of operation of $138 million.
Margareth Øvrum, Statoil's executive vice president for drilling, said that with capital costs of more than $12 billion and a break-even price of more than $80 per barrel, developing Johan Castberg wasn't viable until now.
"We have been working hard together with our suppliers and partners, changing the concept and finding new solutions in order to realize the development," she said in a statement. "Today we are delivering a solid plan for development and operation for a field with halved capital expenditures and which will be profitable at oil prices of less than $35 per barrel."
The price for Brent crude oil, the global benchmark, was around $62 per barrel early Tuesday.
Statoil was already moving forward with operational plans before submitting its program to the Norwegian Petroleum Directorate. The company in November signed a letter of intent with Sembcorp Marine Rigs & Floaters in Singapore for contracts related to the construction of the hull and living quarters for the floating production, storage and offloading vessel that will be deployed at Johan Castberg.
On Tuesday, the company said Johan Castberg with be "a backbone" for further industry development in northern Norway. Apart from the program plan, the company signed a $483 million contract with Aker Solutions to develop the subsea components for the field.
The northern port city of Hammerfest, located in Finnmark county, will also serve as supply and helicopter base for the development of the field.
Norway is one of the larger regional oil and gas producers and designates nearly all of its offshore production for European exports. Preliminary data for September, the last full month for which Norway's government has data, show oil production was 1.44 million barrels of oil per day, lower than expected because of field maintenance.
First oil from Johan Castberg is expected by 2022 and Statoil said the field will be in production for more than 30 years.