Equinor Reports Project Delays and Cost Overruns
Norway's Equinor announced project delays and cost overruns on October 7, blaming the setbacks on the coronavirus pandemic and a weak Norwegian krone.
Norway's national budget was published on October 7, in which its petroleum ministry provided an update on the status of nine Equinor-operated projects already approved for development. Their combined cost is kroner 220bn ($23.6bn).
"The main reasons for the cost increase in the project portfolio this year is driven by Covid-19 and a weakened Norwegian krone," the company said. It noted that the Martin Linge, Johan Castberg and Njord Future projects had seen the greatest cost overruns and their start-ups have been pushed back.
Linge was cleared for development in 2012, and since then its costs have ballooned 96%, or by almost kroner 30bn, Equinor said. There was a kroner 3.6bn increase this year alone, owing not only to the Covid-19 infection control measures but also the need to replace some faulty wells drilled by the field's former operator Total.
The high-pressure, high-temperature Linge field in the North Sea was originally due on stream in 2016. Earlier delays were due in part to a fatal crane crash in 2017 at a Korean shipyard tasked with supplying its platform. Equinor postponed the field's launch again in May, from 2020 to 2021.
Costs at Castberg, a giant oilfield in the Barents Sea, have increased by kroner 2.8bn since its approval in 2018, although excluding currency effects, they have fallen by kroner 1.5bn. The delivery of its floating production storage and offloading (FPSO) vessel has been delayed by one year, Equinor said, pushing back its start-up to the fourth quarter of 2023.
The yard in Singapore building the FPSO has been fully shutdown as a result of the pandemic, Equinor said, noting that work to repair welds on its hull was underway. Norway's Petroleum Safety Authority (PSA) said on September 2 that the company had found issues with the quality of the hull's welds, raising concerns about its long-term integrity.
Lastly the cost of Njord Future, a plan to redevelop the Njord and Hyme oil and gas fields in the Norwegian Sea, has risen by kroner 8.5bn since its approval in 2017 and kroner 4bn since last year. Equinor attributed this increase to Covid-19 restrictions and delays. Its launch has been postponed until 2021.
Despite the setbacks, Equinor said its project portfolio was still strong, noting that the phase-two development of the giant Johan Sverdrup oilfield and the Snorre expansion project remained on track.