Maersk Oil has announced that the capital costs of its marquee Culzean HPHT gas project, in the UK Central North Sea, have been reduced by $500 million as a result of improved drilling efficiency and robust upfront design and project planning.
Investment costs for the Culzean project are now forecast to be approximately $4 billion, a reduction of $500 million compared to the estimate at project sanction, CEO Gretchen Watkins said at the Maersk Group capital markets day in Copenhagen. A significant improvement of project capex has been achieved in close collaboration with partners, suppliers and the authorities. The present break-even estimate for the project now stands at $33/boe, including cost since sanction.
“This updated forecast reflects Maersk Oil’s commitment to world class project execution and our aim to continually improve our major capital projects, together with our partners and suppliers. Achieving cost reduction of 11% during project maturation, we are showing our ability to deliver greater value for investors and stakeholders through effective project delivery and controls,” said Watkins.
Culzean, a HPHT gas condensate development, was approved by the UK’s Oil & Gas Authority in August 2015. Since then, Maersk Oil and co-venturers BP and JX Nippon, have worked together effectively with suppliers to improve the project, supporting positive development in investment costs.
The improved forecast has been achieved through higher drilling efficiency, robust upfront design, project planning, supply chain deflation and supportive foreign exchange movements.
Watkins concluded, “Improvement is largely driven by pulling the levers within our control to enhance Culzean’s project economics. Together with our position in the Statoil-operated Johan Sverdrup field development, Maersk Oil is committed to delivering the next generation of significant North Sea developments.”
Culzean remains on schedule to deliver first production in 2019.