Equinor’s Johan Castberg Arctic oilfield development project in Norway is facing cost overrun and commencement delay mainly due to the Covid-19 pandemic.
The cost estimate for the oilfield development has increased by a further 10% compared with the estimated amount a year earlier, according to the Norwegian Government’s budget document.
According to the document, the cost of the field’s development grew from last year’s estimate of $6.2bn (Nkr53.4bn) to $6.91bn (Nkr59.1bn) now.
According to the initial estimate in 2018 when the Norwegian authorities approved the development plan, the field was to cost $5.95bn (Nkr51bn), with its commissioning planned by the end of 2022.
However, in 2020, Equinor postponed the commencement of the oilfield to the end of 2023.
This was partly due to repair to be carried out on the hull of the floating production, storage and offloading (FPSO) vessel, reported Reuters. The hull is under construction in Singapore.
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This field is planned to be developed with an FPSO production vessel and subsea solutions.
The Covid-19 pandemic further delayed the oil field production commencement to Q4 2024, according to the government document.
Despite the cost overruns, Equinor expects the field to have a break-even price below $35 per barrel.
Equinor owns a 50% stake in the project, which has an anticipated operational life of 30 years. Other project partners include Eni’s subsidiary Vaar Energi with a 30% stake and Norway’s state-owned Petoro with 20% interest.
The Johan Castberg Arctic field is estimated to have proven volumes of between 400 and 650 million barrels of oil.
The document shows that two other field development projects would face cost overruns and delays.
These include Equinor’s Njord Future field in the Norwegian Sea and Vaar Energi’s Balder Future project offshore Norway.
Njord Future field is now estimated to cost $3.46bn (Nkr29.5bn), an increase of about 19% than the amount estimated a year earlier. It will come onstream towards the end of this year, a delay of almost a year.
The Balder Future project is now estimated to cost $3.14bn (Nkr26.8bn), an increase of 34% more than projected a year ago.