Page 9 - Euroil Week 05 2020

EurOil COMMENTARY EurOil
Capex to stay high
Despite the project’s success, Sverdrup’s devel- opment was a considerable financial burden for all of its partners. Its rst phase alone cost NOK83bn ($9bn), while its second phase has a budget of NOK41bn.
Lundin took on considerable debt to nance the project, with its net debt estimated at over $4bn at the end of December, up from $3.4bn a year earlier. While Sverdrup is now producing, it is still expected to account for around 40% of Lundin’s development expenditure in 2020, restricting the company’s free cash ow.
Lundin said last week it anticipated its overall development, appraisal, exploration and aban- donment spending would grow by 30% this year to $1.27bn. Development spending alone will rise by a third to $895mn. Besides work at Sver- drup, these funds will go towards two tie-back projects to the Edvard Grieg eld, Solvieg Phase 1 and Rolvnes EWT, both due on stream in the rst quarter of 2021, as well as in ll drilling at Grieg itself.
Exploration and appraisal spending is slated to total $225mn in 2020, winding down from $298mn last year, when Lundin drilled a record 17 wells on the Norwegian shelf. Nine of these wells were dry, but six led to discoveries, adding 10-50mn boe to Lundin’s resource base. Work on the remaining two is still going.
Lundin intends to drill 10 wells during the year, targeting over 650mn boe of net unrisked resources.
Some $50mn will be allocated to abandon- ment work this year, mostly relating to the decommissioning of the Brynhild project. Lun- din also plans to spend $100mn on developing wind and hydropower capacity.
Green plan
Oil and gas companies everywhere are coming under increasing pressure to address climate change by setting long-term strategies for cutting their carbon emissions to zero.
Lundin last week became the latest major European producer to publish an action plan for emissions reduction, setting a goal of making its operations carbon neutral by 2030. is target is considerably more ambitious than those set late last year by Equinor and Spain’s Repsol, which do not expect to reach net zero until 2050.
Like its competitors, Lundin aims to use renewable energy to power its o shore instal- lations, while also adopting carbon offset measures. Its near-term goal is to bring lower emissions at its oil and gas elds o Norway to below 2 kg of CO2 per barrel from 2023, down from 6.5 kg in 2018. One project will involve hooking up the Grieg eld to the onshore power grid from 2022, via Sverdrup. It will also replace its net electricity usage on the Norwegian shelf through investments in clean energy by 2023, including at an unspeci ed wind power project in 2021.
Lundin’s board has also proposed changing the company’s name to Lundin Energy. ™
PIPELINES & TRANSPORT
East European prepares for US LNG
EAST EUROPE
The goal is creating a regional gas market that can handle US supplies.
11 Eastern European countries have signed a memorandum of understanding (MoU) on developing their gas networks, as part of a Wash- ington-backed project to facilitate supplies of US LNG to the region.
e document was signed by Albania’s Alb- gaz, Bosnia’s BH-Gas, Bulgaria’s Bulgartrans- gaz, Croatia’s Plinacro, Greece’s Desfa, Kosovo’s economic development ministry, North Mac- edonia’s GA-MA AD - Skopje, Montenegro’s Montenegro Bonus, Poland’s Gaz-System, Romania’s Transgaz and Slovakia’s Eustream, as well as the United States Energy Association (USEA).
ey are all members of the Partnership for Development of Natural Gas Networks in East- ern Europe (EE-NGP), set up by USEA and the United States Agency for International Develop- ment (USAID) in 2017, with the goal of “facili- tating the creation of a regional gas market with potential for US deliveries.”
Transgaz said on February 4 it had signed the MoU in order to work with other grid oper- ators to plan networks and establish alternative sources of gas supply.
Many countries in Southeast Europe rely heavily on Russian gas, and in some cases, it is their only option. The situation is starting to change, however.
On the one hand, new import projects are underway, including LNG regasi cation plants in Greece and Croatia, and the Trans-Adriatic Pipeline (TAP) that will run through Albania and Greece and terminate in Italy and which is due to supply gas from Azerbaijan starting this year. On the other, new pipelines are being laid across borders to distribute these new supplies across the region.
EE-NGP is not the only initiative aimed at expanding the market for US LNG in Eastern Europe. In August, the US, Poland and Ukraine signed an MoU to enhance the region’s energy security by increasing US gas supply. e three countries want to develop a supply chain to transport US gas from Polish LNG terminals to Ukraine, and possibly other neighbouring countries such as Romania. Achieving this will require an expansion in Poland’s LNG import capacity, however, as well as the cross-border capacity between Poland and Ukraine.™
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