North Sea Oil: Equinor faces $1.8bn impairment charge after downgrading production forecasts
Norwegian energy group Equinor warned yesterday it faces an impairment charge of about $1.8bn, after lowering resource and output estimates for its Mariner oilfield in the North Sea.
Estimates for total recoverable reserves from Mariner, which is operated by Equinor have been downgraded to 180m barrels of oil, a 35 per cent drop on previous projections of 275m barrels.
The oilfield had originally been expected to pump more than 300m barrels of oil over a 30-year period when it became operational.
Equinor holds a 65.1 per cent stake in Mariner, which is now expected to produce about 22,000 barrels per day for the foreseeable future, down from an average of 30,000 bpd last year.
Located 93 miles east of the Shetland Islands and developed at a cost of $7.7bn, the Mariner field began producing oil in 2019, two years behind schedule and significantly over budget.
In a statement, Equinor said the decision to revise its estimates follows updates from seismic interpretations, and experience from production at the Maureen reservoir.
However, Equinor’s partners said they didn’t agree with the decision to revise production calculations.
Private equity-backed Siccar Point Energy described the downgrade as a “premature” decision, and accused Equinor of pre-empting the work of a joint working group which was established in January and is expected to deliver results in the summer.
This includes joint venture partners Mariner, JX Nippon, and ONE-Dyas.
The Mariner downgrade is the second blow Siccar Point has faced in the North Sea, after Royal Dutch Shell decided to pull out of the Cambo oilfield project, forcing Siccar to pause the field’s development.
The Mariner field consists of two reservoirs, Heimdal and Maureen, with estimates of the resources in place previously subject to uncertainty because of subsurface complexity.
Al Cook, Equinor’s head of international production and exploration, said: “We are committed to working with our Mariner joint venture partners to identify opportunities to improve recovery and production. We plan to continue drilling on the field to prolong cash flow into the future.”
Earlier this week, Equinor flagged a loss on natural gas derivatives of up to $1.5bn.
This has been booked into its upcoming fourth quarter earnings report.