Aker BP's Ærfugl Phase 2 Production Starts Early

Production has started from Aker BP’s first Ærfugl phase 2 well in the Norwegian Sea – three years ahead of the original plan, according to the company.

The Ærfugl field produces via Skarv FPSO approximately 210 km west of Sandnessjøen. It is one of the most profitable development projects on the Norwegian shelf with a break-even price of around $15 per barrel, according to the company.

The Ærfugl reservoir is mainly gas, extends over 60 km and holds a total of 300 million barrels of oil equivalent. Ærfugl was first put on stream with the test producer A-1H in 2013 and since then development of the structure has expanded to include seven wells.

“The acceleration of production from Ærfugl Phase 2 means increased value creation for the Ærfugl joint venture, the supplier industry and the Norwegian society in the form of increased revenues,” Kjetel Digre, SVP Operations & Asset Development, said in a written statement.

“Thus, I’m very pleased to mark this milestone. However, the good news is offset by the fact that we are facing a global crisis that none of us have experienced before. Investments and exploration activities offshore Norway are put on hold. Tens of thousands of employees in our industry are currently at risk.”

In response to market conditions, Aker BP has stopped all non-sanctioned projects, including the Hod redevelopment project in the Valhall area, which was just about to be sanctioned prior to the oil market turning on its head.

“It is clear that the industry’s proposal for temporary adjustments in Norway’s tax regime to improve the industry’s cash flow in the short run – without reducing the total tax payments in the long run – will result in increased activity and new investment opportunities offshore Norway within the next 12 – 24 months,” Digre added.

Phase 1, which develops the southern part of the Ærfugl field, consists of three new wells and will start-up in late 2020. Phase 2 consists of an additional three wells in the northern part of the field. In November 2019 operator Aker BP and partners Equinor, Wintershall DEA and PGNiG approved the final investment decision for Ærfugl Phase 2, and the remaining two phase 2 wells will come on stream in 2021.

“The Ærfugl field development is adding five years lifetime extension to the Skarv FPSO and is an important part of the area development and value creation in the area, though the profitability will be dramatically reduced in the current oil price environment,” says Ine Dolve, VP Operations & Asset Development in the Skarv area.

Total investment costs for the Ærfugl project are around NOK 8 billion ($743 million).

To contact the author, email bertie.taylor@rigzone.com.