Johan Castberg Project

From Global Energy Monitor

The Johan Castberg field is located in the Barents Sea, north of Norway.[1]

Reserves and CO2 Emissions

The proven volumes in Johan Castberg are estimated at between 400 and 650 million barrels of oil.[1] This would produce 172–280 million tonnes of CO2, based on the US EPA estimate of 0.43 metric tonnes of CO2 per barrel of oil.[2]

Strategic Significance

Equinor states that "Johan Castberg is a breakthrough in unexplored areas where we must interact with other interests, such as the fisheries. At the same time, this is a development which will have ripple effects including an impact on technology and expertise building in the supplier industry—particularly in the north."[1] Development of the project would create a gateway to further Barents and Arctic fossil fuel extraction.[3]

Companies Involved

The Johan Castberg partnership consists of Equinor (operator 50%), Eni Norge (30%) and Petoro (20%).[3]

Potential ESG Risks

Corruption

While some studies rank Norway as one of the least corrupt countries in the world,[4] Equinor has been accused of corrupt business-dealings on several occasions, including convictions for making bribes (as Statoil) in Iran in 2002, and the company was questioned by authorities in reference to payments in Libya in 2008 and Angola in 2016.[5][6]

Environment

In November 2017 Greenpeace and Nature and Youth alleged in a lawsuit that drilling permits awarded to Chevron and Statoil (now Equinor) in 2015 violate Paragraph 112 of Norway's Constitution,[7] which states that "natural resources shall be managed on the basis of comprehensive long-term considerations which will safeguard this right for future generations" and that "the authorities of the state shall take measures for the implementation of these principles."[8] Representing the government, Attorney General Fredrik Sejersted claimed that the lawsuit, if successful, "would stop all future oil licenses awarded off Norway and would imperil hundreds of thousands of jobs."[7]

In January 2018 the court found that the project would harm the environment but allowed it on the grounds that most of the oil would be used for export. In February 2018 Greenpeace appealed the decision and asked that it go directly to the Supreme Court without going through the Court of Appeals.[9] In April 2018 the Supreme Court refused to take the case. It is now scheduled to be heard by the Court of Appeals in the fall of 2019.[10]

NGO's Involved

Greenpeace and Nature and Youth were the plaintiffs in the November 2017 lawsuits arguing that offshore drilling in Johan Castberg would violate § 112 of the Norwegian Constitution.

In 2015 the environmental coalition Foreningen Grunnloven § 112 was founded to enforce § 112. Its members include the Norwegian Climate Network, Greenpeace Norway, Grandparents' Climate Action, Nature and Youth, Concerned Students Juss, Spire, CAN - Concerned Artists Norway, Changemaker, Norwegian Climate and Health Network, Concerned Scientists Norway and Nature Conservation. WWF Norway is a subsidiary.[11]

Local Opposition

See NGO's Involved.

Status of Project

In June 2018 the Norwegian Ministry of Petroleum and Energy approved Equinor's plan to develop the field.[12] Initial oil production is scheduled for 2022.[3]

In October 2020, Equinor announced that the Johan Castberg Project's start-up was delayed by one year to the fourth quarter of 2023 due to US$300 million cost increases arising from the Covid-19 pandemic, the weakened Norwegian krone and unforeseen increases in the scope of work. Specific technical problems have affected the project's floating production storage and offloading vessel which has been delayed by a year both due to the closure of the fabrication yard in Singapore as a result of the coronavirus but also problems with welding, which had necessitated repairs.[13]

Infrastructure

In June 2018 Norway's parliament voted in favour of developing the Johan Castberg oil field in the Barents Sea.[14] Accompanying this decision was the refloating of plans to build an oil terminal at Veidnes, a renowned beauty spot overlooking the Barents Sea. Equinor said that it expected an investment decision on the possible land terminal at Veidnes to be be made in 2019.[14] Following assessment of the feasibility of developing the oil terminal, in December 2019 the Johan Castberg partnership companies announced they would not be proceeding with construction due to the excessive costs involved.[15]

Domestic Political Situation

In 2017 Norway's Sovereign Wealth Fund was advised by Norway's central bank and by the Fund's own ethics adviser to drop its investments in oil, the former making the recommendation for economic reasons, the latter for economic and ethical reasons. In August 2018 Norway's parliament urged the fund to reject these recommendations.[16] With US $1 trillion in assets, it is the largest state-owned fund in the world so any decision to divest would have a dramatic impact on other investment funds.

Project Economics

When the field was discovered in 2011, Equinor estimated that its break-even point for profitability was US $80 per barrel, but Rystad now estimates it at US $35 per barrel.[17] With the Norwegian parliament approving the project in June 2018, this low price-point, if accurate, makes it highly likely that the project will proceed without greater opposition.[18]

Tax Revenues

International Dynamics

Russia claims that the Svalbard Treaty prevents Norway from unilaterally drilling in the Svalbard portion of the field.[19]

Financing

Lenders and investors for the project include Norges Bank and Norway's Statens Pensjonsfond.[20]

Articles and resources

References

  1. 1.0 1.1 1.2 "Johan Castberg," Equinor, accessed August 2018
  2. "Greenhouse Gases Equivalencies Calculator - Calculations and References," U.S. EPA, accessed September 2018
  3. 3.0 3.1 3.2 Johan Castberg PDO approved, Equinor, Jun. 12, 2018
  4. Norway Corruption Report, GAN, May 2018
  5. UPDATE 1-Statoil says briefed Norwegian police on Angola payments, Reuters, Feb. 19, 2016
  6. Statoil's Ties To Corruption, Behind The Logos, accessed September 2018
  7. 7.0 7.1 Norway environmental lawsuit says Arctic oil plan violates constitution, Reuters, Nov. 2017
  8. Going All In: Norway proposes massive opening of Arctic shelf, The Barents Observer, Mar. 13, 2017
  9. These four climate cases are changing how we can tackle climate change, Greenpeace, May 25, 2018
  10. International Law and Article 112 of the Norwegian Constitution on the Right to Environment, Workshop at The University of Oslo, May 15, 2018
  11. Who are we?, Foreningen Grunnloven § 112, accessed September 2018
  12. Norway green-lights Johan Castberg project, Offshore, Jun. 12, 2018
  13. Nick Coleman, "Norway's Equinor hit by cost over-runs, delays to major oil, gas projects", S&P Global, Oct. 7, 2020
  14. 14.0 14.1 Norway's Parliament says this Arctic beauty spot should be oil terminal, The Barents Observer, Jun. 3, 2018
  15. Equinor Drops Oil Terminal Plan For Johan Castberg Arctic Field, OilPrice.com, Dec. 13, 2019
  16. Norway's $1tn wealth fund urged to keep oil and gas investments, The Guardian, Aug. 24, 2018
  17. JOHAN CASTBERG: NORWAY’S NEW BARENTS SEA CASH MACHINE WINS APPROVAL, Rystad Energy, Jun. 11, 2018
  18. Norway's parliament approves plan for Arctic oilfield, Reuters, Jun. 11, 2018
  19. The Beginning Of The End For Norwegian Oil, Oil Price, Dec. 18, 2017
  20. The People versus Arctic Oil litigation, Norway, EJ Atlas, accessed September 2018

Related SourceWatch articles

External resources

External articles