Investment decision for Barents Sea project postponed amid cost growth in supply industry

Norwegian oil and gas firm Equinor and its Wisting project partners have decided to postpone the investment decision scheduled for December 2022 amid cost increases due to increased global inflation and cost growth in the supply industry.

As a result, the maturation of the Barents Sea project continues, aiming for an investment decision by end of 2026, Equinor said on Thursday. The updated investment estimate for Wisting is NOK 104 billion (about $10 billion) and the project has a positive Net Present Value before and after tax after the cost increase. The investment was previously estimated to be in the range of NOK 60 billion – NOK 75 billion.

The Wisting project is located in the Hoop area in the Barents Sea, some 310 kilometres north of Hammerfest. The water depth is between 390-418 metres.

Just last month, Equinor issued a complementary assessment for the Wisting development for public consultation, providing more details on how the field can be developed and operated in a safe and secure manner.

Geir Tungesvik, Equinor’s executive vice president, Projects, Drilling & Procurement, said: “In our updated investment estimate for the project, we see a cost increase due to increased global inflation and cost growth in the supply industry nationally and internationally. There is also uncertainty about the framework conditions for the project and execution capacity in the supplier market. Based on an overall assessment, we choose to postpone the investment decision.”

According to Equinor, global inflation, and challenges in the energy markets because of the war in Ukraine, creates capacity challenges and bottlenecks among international and Norwegian suppliers. The lead time from the yards and from the equipment suppliers has increased.

“Many people have been working hard to realise Wisting, and the decision is demanding. However, in the current supplier market postponing the investment decision to ensure an economically sound development and robustness in the execution phase of the project is the right decision. When the pressure in the supplier market subsides, the Wisting project will be possible to execute in a good way,” said Tungesvik.

Kjetil Hove, executive vice president for Exploration & Production Norway, said: “We have a long-term perspective with the Castberg field coming on stream in 2024, we will continue to explore, and we will further develop the Barents Sea.”

“We will now, together with partners and suppliers, mature a profitable Wisting project that will have ripple effects in the North within the ordinary tax regime. We have previously successfully improved projects facing challenging cost developments prior to final investment decision. We will aim to do the same with the Wisting project,” added Hove.

Equinor and partners will now further mature the development concept, the power-from-shore solution, and consider new supplier models for Wisting.

The Wisting partners include Equinor (35 per cent), Aker BP (35 per cent), Petoro (20 per cent), and INPEX Idemitsu Norge (10 per cent). Equinor is the operator in the development and operations phase.