Norway’s Offshore Project Costs on the Rise

Energy firms Equinor, Aker BP and Vaar Energi have raised their crown-denominate cost estimates for major oil and gas development projects offshore Norway, the country’s government said on Monday.

Equinor’s Johan Castberg project is now expected to cost 86 billion crowns ($8.08 billion), up from a nominal estimate of 80.3 billion seen one year ago, the government’s fiscal budget documents showed.

The oilfield the Arctic Barents Sea is expected to start production by the end of this year, the company has said, two years behind its original schedule.

The field was initially estimated to cost 49 billion crowns to develop, when it was approved in 2018.

Since then, costs have increased by 25.7 billion crowns and by 2.2 billion crowns from a year ago, measured in 2024 crowns, Equinor said in a statement.

The increase from a year ago was due to Castberg’s production vessel having to spend more time at a shipyard in Norway, currency effects and a general cost increase, the company said.

Meanwhile, Aker BP’s Yggdrasil is expected to cost 134.4 billion crowns, up from nominal 120.2 billion seen a year go, while Vaar’s Balder Future will cost 52.2 billion crowns, up from 44.5 billion crowns.

Cost increase measured in 2024 crowns were due to a weaker exchange rate, which contributed to imported inflation, said an Aker BP spokesman, adding that costs measured in U.S. dollars were within previous guidance.

Vaar Energi was not immediately available for comment.

The independent subsidiary of Italy’s Eni warned in August that Balder’s project costs would increase by pre-tax 4.3 billion crowns due to its startup being delayed until the second quarter of 2025 from end of this year.

Balder’s costs have more than doubled from an initial estimate of 19.6 billion crowns in 2019.

Aker BP’s Yggdrasil, Norway’s largest oil and gas development since the startup of Equinor’s Johan Sverdrup oilfield in 2019, is facing legal challenges, with environmental organisations disputing its approval by the energy ministry.

The company, however, has said the project, approved at the end of 2022, is on track to start production in 2027.

($1 = 10.6472 Norwegian crowns)

(Reuters – Reporting by Nerijus Adomaitis, editing by Terje Solsvik and David Evans)