Var Energy provided an update on the progress of the Development of Balder X and a revised cost estimate that reflects the increased scope of work, the continued impact of global supply chain challenges, Covid-19 and schedule change. The Company’s production target of more than 350,000 boed by the end of 2025 is not affected.
Balder XIncluding A balder future and the Ringhorne Phase IV Drilling Projectsis set to eExtend Balder Hub production until 2045 and support the development of new nearby discoveries by improving existing infrastructure and drilling new wells. A baseline review of the project identified additional gross investment needs of USD 1.2 billion* (NOK 11.5 billion)bringing the estimated total gross cost of the project to 4.3 billion USD (40.7 billion NOK). Balder X’s first oil is now expected in the third quarter 2024compared to the end of 2023.
The revision will have no impact on the 2022 CAPEX forecast and the Company maintains its dividend forecast for 2022 and its long-term dividend policy. The main production impact of the revised schedule is expected in 2024, but partly mitigated by a faster production ramp-up as more Balder Future production wells are expected to be ready to start. The Company also expects the majority of incremental capital expenditure to be incurred in 2024.
“We are committed to safely executing the remaining scope of the project to complete the renovation of the Jotun FPSO as efficiently as possible. Balder X remains a highly profitable project that is expected to increase gross production from Balder Hub to over 70,000 barrels of oil equivalent per day at peak with an attractive breakeven price,” said Torger Rød, CEO of Vår Energi.
The new cost estimate and schedule change are mainly related to Balder Future, with increased scope and additional engineering and construction work on the Jotun FPSO life extension. External factors, including Covid-19, harsh weather conditions for drilling and offshore activities, and inflation in commodity and service prices have to some extent impacted the overall project. The main focus areas are to ensure progress and cost control for the remaining part of the project.
Balder X should unlock approximately 143 million barrels of recoverable reserves. Once the Jotun FPSO is reinstalled and connected to the Balder Future producing wells, it will be connected to the new Ringhorne wells. In addition, the King and Prince discoveries announced in 2021, estimated at an additional 60-135 million barrels of oil, are being considered for links with the Jotun FPSO. Vår Energi is also evaluating new exploration prospects in the highly prolific Balder region.
“The Balder Hub will remain an important contributor to the long-term value creation of the Norwegian continental shelf. Balder is part of the first production license granted in Norway and has since 1999 produced approx. 500 million barrels of oil and gas equivalent, contributing to the security of European energy supply and the development of Norwegian society. We see potential to increase production from the greater Balder area up to 1 billion barrels based on planned projects, recent discoveries and the addition of at-risk exploration resources,” said Rod.
The revised cost estimate and timeline will be included in Norway’s national budget for 2023 which will be released on October 6, 2022.
* USD/NOK exchange rate 9.5
The Balder X Project
- The Balder field is in production under license PL 001 – the very first license on the Norwegian Continental Shelf (NCS) – acquired in 1965.
- The Balder X project aims to extend production to 2045 and consists of four ongoing projects: Balder FPU life extension – vessel upgrade, drilling new wells on Ringhorne III/IV and Balder Future , including the life extension of the Jotun FPSO and the drilling of 14 new production wells and one injection well.
- The project reuses existing infrastructure to reduce the development footprint and open up to potential future retirement of generation assets, which could reduce annual CO2 emissions by approximately 100,000 tonnes per year.
- The King and Prince discoveries in the Balder area, estimated at 60 to 135 million barrels of oil, are currently being evaluated for links to the Jotun FPSO.
- Licensees: Vår Energi ASA 90% and Mime Petroleum AS 10%
Source: Vår Energi