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October 8, 2019

Equinor reports reduced costs at eight NCS projects, increases on four

Equinor has reported cost changes in its projects on the NCS, with reductions at eight projects and increases at four since plans were submitted.

By Umar Ali

Norwegian energy company Equinor has reported cost changes in its projects on the Norwegian Continental Shelf (NCS), with reductions at eight projects and increases at four since the development and operation plans were submitted.

These changes come from the Norwegian Ministry of Petroleum and Energy, which published the state budget on 8 September 2019, reporting on major projects that have recently started operation or are currently undergoing development.

Equinor is the operator for 21 projects in the execution phase, with a total investment of around $23.08bn (NOK210bn). 20 of those projects are at Norwegian onshore facilities or on the NCS, and 13 of these projects were published in the Ministry’s list. Of these 13, only one project remains unchanged.

Two projects have seen a cost increase greater than 20%, which, according to the company, is the standard range of uncertainty in cost estimates for plans of development and operation (PDOs).

One of these projects is the Martin Linge development, which has seen estimates increase by NOK7.9bn in 2019-kroner, compounding problems caused by the “significant delays and substantial cost overruns” the project suffered prior to being acquired by Equinor in March 2018.

Start-up for Martin Linge is now expected in the third quarter of 2020 as opposed to the plans made in 2018 to start production in the first quarter of 2020.

Equinor executive vice president for technology, projects and drilling Anders Opedal said: “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.

“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.”

Equinor also stated that the work needed to upgrade the Njord A platform and the Njord Bravo storage ship has been “more comprehensive than expected,” with a cost increase of around NOK4.5bn in 2019-kroner to account for more extensive replacements on both installations.

The company started production on the first phase of the Johan Sverdrup field development in October 2019 ahead of schedule, with cost reductions of NOK31.4bn in 2019-kroner.

Opedal said: “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 PDO.”

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