Equinor cuts costs on eight Norwegian projects but sees increase on four

Norwegian oil and gas company Equinor has reduced costs for eight of its operated projects in Norway since submitting their plans for development and operation while four projects – including Martin Linge and Njord Future – have reported higher costs.

The Martin Linge platform (left) in the North Sea and the Njord A platform at Kværner Stord. (Photo: Jan Arne Wold (left) and Ole Jørgen Bratland)

Equinor is the operator for 21 projects in the implementation phase, with a total investment of around 210 billion kroner ($23.08 billion). Equinor said on Monday that 20 of these are on the Norwegian shelf or at Norwegian onshore facilities.

As previously reported, production from the first phase of Johan Sverdrup started on October 5, well ahead of schedule, while costs have been reduced by NOK 31.4 billion in 2019-kroner (40 billion in nominal kroner, based on a fixed exchange rate).

“We have started production from four fields on the Norwegian shelf in less than three months. In addition to the giant Johan Sverdrup field, we have also started operations on Trestakk, Snefrid Nord and Utgard. All have been delivered ahead of or on schedule, and most of them have reduced costs compared with the cost estimate in the plan for development and operation (PDO),” said Anders Opedal, Executive vice president for technology, projects and drilling.

In the state budget published on Monday, the Ministry of Petroleum and Energy reported on the status of major projects that are currently undergoing development or have recently started operation.

 

Reduced costs for 8 and higher costs for 4 projects

 

Equinor said that thirteen of its projects were on this list. Eight of the projects have reduced costs since submitting their plans for development and operation, one project remains unchanged, while four projects have reported higher costs, according to Equinor.

Two projects have seen an increase greater than 20 percent, which is the standard range of uncertainty in PDO cost estimates. Since the previous report to the state budget, estimates for the Martin Linge project have grown by 7.9 billion in 2019-kroner. This project, which had already suffered significant delays and substantial cost overruns, was taken over by Equinor in March 2018.

“For Equinor, the most important thing is that we start up a safe platform. Martin Linge is a complex project, and the scope of work has increased. This means increased costs and somewhat more time before we can start production,” said Opedal.

Expected start-up is now in the third quarter of 2020. Last year Equinor communicated start-up first quarter 2020. More than 1,100 people are now working every day out on the field and onshore to get the platform ready for start-up.

“Hook-up and commissioning of Martin Linge is an enormous task, but both we and our suppliers are working diligently to complete our work so we can start up a safe platform,” said Opedal.

The work to upgrade the Njord A platform and the Njord Bravo storage ship has also been more comprehensive than expected. The Njord Future project entails an extensive rehabilitation to extend the lifetime of both the platform and the storage ship. This will enable the field to produce for another 20 years, and to accommodate new discoveries.

The cost increase of around 4.5 billion kroner (2019-kroner) is due to the need for more extensive replacements than expected, on both installations.


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