Arctic oil to start flowing from €5.6bn polar platform

Sep 27, 2015 12:00 AM

In an industry where everything is big, Goliat will take some beating. Designed to weather the worst Arctic storms and hold nearly a million barrels of crude, Eni’s 64,000-tonne oil platform is about to prove whether money can be made in the world’s last unexplored frontier.

The ENI Goliat being floated to the Arctic

More than a decade after the company struck oil in the Barents Sea, industry experts say the €5.6bn platform, beset by delays and cost overruns, is undergoing final tests and will begin production imminently.

“It’s there, it’s connected, it’s done. It’s starting in a few weeks,” one insider said.

With output expected to peak at 100,000 barrels per day, the field’s start-up, two years later than originally planned, will come as a relief for the Italian energy group, which has a 65 per cent stake in the project. Norway’s Statoil holds the remainder.

The fall in oil prices since June last year has called into question the viability of high-cost production in areas such as the Arctic. Royal Dutch Shell is drilling in the Chukchi Sea off Alaska, but dozens of other projects have been put on hold.

Goliat will be only the second producing oilfield in the polar region and the world’s most northerly. Lying more than 80km off Norway, it is estimated to hold 174mm barrels of recoverable oil reserves and 8bn cubic metres of gas.

The floating, cylindrical platform, likened to a beer glass, arrived in Hammerfest on Norway’s north coast earlier this year after a trip of more than 15,000 miles from South Korea. It holds a cinema and health club and can accommodate 120 workers in its round hull.

Such a project, which some believe could require oil prices as high as $80 to $90 per barrel to break even over its 15-year life, would have little chance of winning approval in today’s gloomy sub-$50 environment. Its delivery, though, should help Eni, which cut its dividend in March, shore up cash flow.

Goliat, and recent finds such as this month’s Zohr gas discovery off the coast of Egypt, are at the heart of Eni chief executive Claudio Descalzi’s strategy of shifting the company’s focus to upstream exploration and production.

As industry-wide discoveries of new oil and gas reserves have dwindled, Eni has found 10bn barrels of resources in the past seven years and 300mm in the first half of this year.

“They are doing exceptionally well with exploration. Not everyone can say that,” said one energy analyst.

The company expects output to rise more than 7 per cent this year and annual production growth of 3.5 per cent from 2014 to 2018. Goliat is one of more than a dozen new projects, which will contribute more than 650,000 barrels of oil equivalent a day of output over that period.

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