Eni Starts Arctic Production

Eni Starts Arctic ProductionEni Starts Arctic Production

Italian firm Eni began producing oil from its Goliat field in the Norwegian Arctic late on Saturday, making it the world's most northerly oilfield in production.

"It started last night," said an Eni spokesman on Sunday. "We have reached an important milestone not only for Eni, but also for the industry and for Norway."

The launch of the field has been delayed several times since the initial planned date of 2012, Reuters reported.

Costs also surged to 46.7 billion crowns ($5.56 billion) from an original estimate of around 30 billion in 2009, when the development plan was approved.

Output from the field is due to peak at around 100,000 barrels of oil per day. The production facility also has storage capacity for 1 million barrels of oil.

Asked about the multiple delays, Eni said Goliat was a "pioneering project" that involved new technology on which the oil industry would build for the future. ENI has a 65% stake in the field, with Norway's Statoil holding the remaining 35%.

But Goliat has been a giant headache for Eni.

“If they had known back then that it would be this expensive, they wouldn’t have gone ahead with it,” said Erik Holm Reiso, a partner at Oslo-based consultant Rystad Energy AS.

Eni needs oil prices to average $95 to $100 a barrel over the production period of 15 years for the project to make a profit, according to Rystad.

Rome-based Eni said its own calculations show a break-even price on Goliat of less than $50.

“When you’ve gotten this far, it would be unreasonable not to go through with the project,” Reiso added. “The capital expenditure has now been sunk and the decision to stop the project now would only be made if they believed oil will stay below $30.”