Equinor and Exxon bet $8 bln on Brazilian field with reduced emissions

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Equinor's flag in Stavanger, Norway December 5, 2019. REUTERS/Ints Kalnins/File Photo/File Photo

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  • Bacalhau has light oil with reduced contaminants, companies say
  • Consortia estimate about half of regular CO2 emissions
  • Oil field can be profitable at $35 per barrel

OSLO, June 1 (Reuters) - Norway’s Equinor ASA (EQNR.OL), Exxon Mobil Corp(XOM.N) and Petrogal Brasil will pour $8 billion into a Brazilian deepwater oil field development that is expected to produce about half of the average carbon emissions of similar projects, the companies said in a joint statement on Tuesday.

The announcement comes days after a series of defeats for oil companies amid a growing push by investors and activists to make the industry more proactive in combating climate change. Exxon shareholders voted in two new board members supported by a tiny hedge fund that said the company’s moves on reducing emissions were inadequate.

Earlier the International Energy Agency (IEA) called on companies to stop investing in new oil and gas projects if the world wants to reach net zero emissions by mid-century, a call for action that Equinor said would have no impact on its plans.

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Brazil's Bacalhau oil discovery, to be operated by Equinor, is expected to produce about 9 kg of carbon dioxide (CO2) per barrel, against a global average of 17 kg per barrel, the companies said.

Bacalhau produces light oil with reduced contaminants, the companies said. The associated natural gas will be reinjected inside the reservoir in the first phase of the project. The consortium said it will invest on turbines to increase the energy efficiency of the power plant that will feed the project during production.

The first oil from Bacalhau is expected in 2024, with output set to reach 220,000 barrels per day, the companies said in thejoint statement. It will be the first field in the prolific pre-salt area that will be developed by an international operator and not state-controlled Petroleo Brasileiro SA (PETR4.SA).

"Estimated recoverable reserves for the first phase are more than 1 billion barrels of oil," said Equinor Executive Vice President Arne Sigve Nylund.

The field has a break-even cost below $35 per barrel, Equinor said, or around half the current market price of crude oil.

Equinor and Exxon each hold a 40% stake in Bacalhau, while Petrogal Brasil holds 20%. Brazilian government company Pre-sal Petroleo SA (PPSA) is also a partner via a so-called production sharing agreement, ensuring the Brazilian governmentpart of the project's output.

A Dutch court last week ordered Royal Dutch Shell to drastically deepen planned emissions cuts. On the same day, Exxon lost two seats to hedge fund Engine No. 1 in a corporate dispute that became a referendum on its climate change strategy, while Chevron Corp shareholders voted for a proposal to cut emissions generated by the use of the company's products.

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Reporting by Terje Solsvik Editing by David Goodman

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