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Equinor warns of $1.8 billion UK oilfield impairment

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By Reuters
Equinor warns of $1.8 billion impairment charge for Britain's Mariner oilfield
Equinor warns of $1.8 billion impairment charge for Britain's Mariner oilfield   -   Copyright  Thomson Reuters 2022

By Terje Solsvik and Nerijus Adomaitis

OSLO -Norwegian energy group Equinor warned on Wednesday it faces an impairment charge of about $1.8 billion after lowering resource and output estimates for its Mariner oilfield in the British North Sea.

Total recoverable reserves from Mariner, which is operated by Equinor, is now estimated at about 180 million barrels of oil equivalent, sharply down from a previous projection of 275 million barrels, the company said.

“The reserve revision is linked to an updated seismic interpretation and experience from production of the Maureen reservoir which led to a revised reservoir model,” Equinor said.

“This revised reservoir model is further supported by results from the first well into the Heimdal reservoir, drilled in 2021,” it added.

Equinor’s partners, however, said they didn’t agree with the decision to revise estimates.

Private equity-backed Siccar Point Energy said the revision was “premature” and pre-empted the work of a joint working group which was established in January and is expected to deliver results in the summer.

“The other JV partners in Mariner, JX Nippon and ONE-Dyas, share this view,” Siccar added in a statement.

The Mariner downgrade is the second blow in about a month handed to Siccar Point by a major about a project in the British North Sea.

Last month, Royal Dutch Shell decided to pull out of the Cambo oilfield project, forcing Siccar to pause the field’s development.

Mariner, in which Equinor holds a 65.1% stake, is now expected to produce about 22,000 barrels per day (bpd) for the foreseeable future, down from an average of 30,000 bpd last year, a spokesperson for the Norwegian company said.

Initial expectations were for the field to produce about 55,000 bpd.

JX Nippon holds 20%, Siccar Point 8.89% and ONE-Dyas 6% in the field.

Equinor said the impairment charge would be booked in its earnings report for the final quarter of 2021, which is due on Feb. 9.

Located 150 km (93 miles) east of the Shetland Islands and developed at a cost of $7.7 billion, the Mariner field began producing https://www.reuters.com/article/uk-norway-equinor-oil-idUKKCN1V50ZG oil in 2019, two years behind schedule https://www.reuters.com/article/equinor-britain-mariner-idUSL8N21S2AM and significantly over budget.

The oilfield had originally been expected to pump more than 300 million barrels of oil over a 30-year period, Equinor said when the field became operational.

“We are committed to working with our Mariner joint venture partners to identify opportunities to improve recovery and production,” said Al Cook, Equinor’s head of international production and exploration.

“We plan to continue drilling on the field to prolong cash flow into the future.”

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.

On Tuesday, Equinor flagged a loss on natural gas derivatives of up to $1.5 billion, which will also be booked in the fourth quarter earnings report.