Equinor’s Johan Castberg Project Sees Nearly NOK 13 Billion Cost Increase, But Production Timeline Unchanged

Equinor’s Johan Castberg Project Sees Nearly NOK 13 Billion Cost Increase, But Production Timeline Unchanged

(IN BRIEF) The Johan Castberg partnership, consisting of Equinor, Vår Energi, and Petoro, has announced an upward revision of the project’s cost estimate, with an increase of nearly NOK 13 billion compared to the previous year. Despite these cost escalations, the project’s timeline for commencing production in the fourth quarter of 2024 remains unchanged. The rising costs are attributed to a more extensive and complex workload transferred to Stord, which exceeded initial estimates. Additionally, the project faced deviations from its planned progression, and industry-wide cost increases influenced marine operations, drilling, and completion expenses. Despite the cost adjustments, Johan Castberg remains a financially viable project, with a breakeven point of approximately USD 35 per barrel.

(PRESS RELEASE) STAVANGER, 19-Sep-2023 — /EuropaWire/ — Our plan for production start in the fourth quarter of 2024 remains unchanged.

“Costs are increasing due to a larger than expected scope of work and cost increases in the industry, we take this seriously. However, Johan Castberg is still a good project with a solid economy. With a breakeven of around USD 35 per barrel, Johan Castberg will provide substantial revenue and ripple effects to the community from the Barents Sea for 30 years,” says Geir Tungesvik, Equinor’s executive vice president for Projects, Drilling & Procurement.

In 2022, the Johan Castberg hull, including living quarters, was transported from Singapore to Stord for installation and commissioning. The main reason for the rise in the investment estimate from last year is that the workload transferred to Stord has been more comprehensive and complex than estimated. In addition, the project has not progressed as planned. Due to the market cost development the marine operations, drilling and completion costs have also increased.

When the plan for development and operation (PDO) was submitted in 2017, the cost estimate was NOK 57 billion (2023). The updated project cost estimate is now NOK 80 billion. Project costs have risen by NOK 15.5 billion, in addition to a currency effect of just above NOK 7 billion.

Infection control measures and reduced access to labour in connection with the Covid-19 pandemic affected the project, both in Singapore, where the hull and living quarters for the production vessel were constructed, and at Norwegian yards constructing modules for the production facility.

Proven volumes in Johan Castberg are estimated at between 450 and 650 million barrels of oil. The vessel is designed for a daily production of close to 190 000 barrels.

Every day around 2000 people work on completing the FPSO at Stord. In the operations phase Johan Castberg will provide jobs, ripple effects and revenue to the community for 30 years. Johan Castberg is estimated to require 1700 person-years of work during the operations phase, of which 500 will be in Northern Norway.

Facts

• Licence owners: Equinor Energy AS (operator, 50%), Vår Energi ASA (30%), Petoro AS (20%).
• Johan Castberg is located around 100 km north of the Snøhvit field in the Barents Sea, 150 km from Goliat and almost 240 km from Melkøya in Hammerfest. Water depth is 360-390 metres.
• Johan Castberg is a subsea field with 30 wells distributed on 10 templates and two satellites tied back to a floating production, storage and offloading vessel (FPSO).
• The Johan Castberg field development provides important infrastructure in a new oil province in the Barents Sea.
• In 2022, two more discoveries were made that are considered for tie-back to Johan Castberg, and plans are made for further exploration in the vicinity in the years ahead.
• Operation of Johan Castberg will be serviced by a supply and helicopter base in Hammerfest and an operations organisation in Harstad.

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SOURCE: Equinor ASA