Norway tweaking 2025 national budget to fit Equinor offshore projects’ cost overruns

Norway’s Ministry of Energy has listed the status of 13 projects, either under development or recently completed, out of 19 operated by the Norwegian state-owned energy giant Equinor in the country’s proposed budget for next year.

The 13 projects in question are Breidablikk, Gina Krog alternative oil export, Halten Øst, Kristin Sør phase 1, Sleipner power from shore, Troll West electrification, Irpa, Verdande, Snøhvit Future, Njord electrification, Eirin, Johan Castberg, and Oseberg gas phase (OGP) 2 and power from shore.

“Equinor has a good portfolio of profitable projects being developed in Norway, which will contribute to long-term security of supply of oil and gas to Europe. In 2023, our developments contributed to high activity and 25 billion kroner to the Norwegian supplier industry. Together with our partners and the industry, we have completed six projects during the past year,” says Trond Bokn, head of project development in Equinor.

Earlier this year, Archer, KCA Deutag Drilling Norway, and Odfjell Operations won contracts to provide drilling and other services at 19 offshore assets operated by the Norwegian giant.

As reported, the projects included in the 2025 budget proposal have a total investment framework of 198 billion NOK (almost $18.6 billion) from start to commissioning, with a recorded 3% cost increase, amounting to 6.5 billion 2024-NOK, or approximately $6.1 billion, over the past year. 

The overall increase since the plans for development and operation (PDOs) amounts to 32.9 billion 2024-NOK – nearly $3.1 billion – with currency effects accounting for 37% of this. If the Johan Castberg project and currency effects are omitted, the Norwegian firm says the cost increase for the reported projects totals around 3% since PDOs.

The Snøhvit Future project encompasses onshore compression and electrification of Hammerfest LNG on Melkøya. Leonhard Nilsen & Sønner (LNS) was picked to do construction and installation work at the project in January.

Since the plans for PDO, the Snøhvit Future cost went up by 1.9 billion 2024-NOK, or around $178.3 million. 26% of this is said to relate to currency effects. According to the Norwegian giant, the main reason for higher costs is the joint venture’s decision to change the design of an electric boiler for safety reasons.

Two projects have experienced a post-PDO increase of more than 20%, and are therefore mentioned specifically in the proposed national budget.

The first one is Johan Castberg, which recently saw the arrival of the floating production, storage, and offloading (FPSO) unit at the field, putting the development on track for start-up by the year’s end. The cost increase for this project is 2.2 billion 2024-NOK or approximately $206.5 million since last year when it was pushed up by over $1.2 billion from the previous year’s estimate.

The latest overrun is attributed to the FPSO’s longer stay than estimated at Aker Solutions’ shipyard at Stord, currency effects – accounting for nearly NOK 800 million (around $75.1 million) – and a general cost increase. Since the PDO, estimated costs have grown by 25.7 billion 2024-NOK, or $2.4 billion, 31% of which is attributed to currency effects.

The second project is OGP 2, encompassing partial electrification of the Oseberg Field Centre and Oseberg Sør platform, along with the installation of a new compressor module at the field center. In April, the Norwegian firm exercised its first option to extend the drilling waste management contract with Soiltech.

Over the past year, the cost for this development went up by 1.2 billion 2024-NOK, or around $112.6 million, while an increase of NOK 2.5 billion in 2024-NOK (approximately $234.7 million) was registered since the PDO. 

The firm places responsibility for this on longer delivery times for new transformers that were destroyed in a fire at Hitachi’s factory in Vaasa in 2023, as well as delays related to increased complexity. Planned commissioning has been bumped from 2026 to late 2027.