Norwegian Offshore Suppliers Regaining Competitiveness

By The Maritime Executive 02-24-2015 07:09:41

Norwegian engineering firm Aibel has won a contract worth 8 billion crowns ($1.05 billion) from Statoil to build a drilling platform for the Johan Sverdrup field, one of the biggest deals for the giant North Sea field.

Aibel, a subsidiary of Swedish private equity firm Ratos, plans to deliver and install the platform in 2018, a year before Europe's costliest offshore energy project starts running.

The $29 billion oil field is expected to produce some of the world's cheapest offshore oil that will be profitable even after the recent price crash when it starts running in 2019.

The contract win, coming under the 10 billion crowns Statoil had earlier said it had received for the drilling deck shows that Nordic oil may be regaining their competitiveness, having lost out to Asian rivals.

Statoil has warned Nordic oil service firms that they needed to lower their costs if they wanted win North Sea contracts.

"Targeted efforts have been made to reduce costs and ensure a cost-efficient delivery and execution," Statoil said. "We are therefore pleased to see that Norwegian suppliers have regained their competitiveness."

Nordic oil companies have made securing Sverdrup contracts a top priority as oil prices tumble and oil investments elsewhere are cut back.

Norway's Kvaerner and Aker Solutions have already won Sverdrup contracts, helping offset some of the industry's spending cuts.

But Kvaerner said it would have to cut costs in its platform deck business after losing out on the Statoil contract to Aibel.

With up to 3 billion barrels of oil equivalents and peak production seen at up to 650,000 barrels per day, Sverdrup is one of the biggest North Sea finds in decades, giving Norway's oil sector a big boost after production has been on a steady decline since 2000.

The field, in relatively shallow waters in a mature area, is also among the cheapest to produce, breaking even at an oil price under $40 per barrel, ensuring profitability even after oil prices have halved and now trade under $60 per barrel.

Aibel will build the platform in separate modules in Norway and Thailand, before assembling it at its Norwegian yard.

Rivals Odfjell and National Oilwell will receive substantial subcontracting work, Aibel said.

Copyright Reuters 2015.