Vår Energi suffers delays at North Sea project due to Covid-19

Oil and gas companies are still feeling the impact of the Covid-19 pandemic as new projects are being delayed and costs are rising due to continuous challenges arising from related restrictions. Such is the Vår Energi-operated Balder Future project in the North Sea offshore Norway.

The Balder Future project is expected to prolong the life of two offshore fields, Balder and Ringhorne, by 2045. The project is part of Vår Energi’s investment in extending production from the Balder field with an estimated investment of NOK 19.6 billion or about $2.3 billion.

Vår Energi is the operator of the project with a 90 per cent interest and Mime Petroleum is its partner with the remaining 10 per cent interest.

Mime said in an update on Wednesday that, based on the latest developments, the previously communicated challenges related to Covid-19 in maintaining scheduled progress remains. As a result, it is expected that the timing of the first oil is delayed beyond the first half of 2023, the company stated.

According to Mime, Covid-19 has impacted equipment deliveries and the available workforce at the yard due to closed borders.

“Detailed work and assessments to evaluate the impact of the current situation are ongoing, and it is currently not possible to provide a new specific scheduled first oil date or provide further guidance on the expected cost increase”, the company said.

Located in production license PL 001 – the very first license on the Norwegian Continental Shelf (NCS) – the Balder Future project involves drilling thirteen new production wells and one new water injection well on the Balder field, with an aim to recover 136 million barrels of oil equivalent (Mboe).

The project also includes extending the lifetime of the floating production storage and offloading vessel Jotun A FPSO. The floater has been producing oil from the Jotun field in the North Sea since 1999.

The field development plan for the Balder Future project was filed with the Norwegian authorities back in December 2019 and approved in June 2020.

In December 2019, Vår Energi also awarded the drilling contract to Seadrill’s West Phoenix offshore drilling rig. Operations were scheduled to start in Q2 2021 and run through 3Q 2023.

In June 2020, the Jotun FPSO vessel was taken ashore to Rosenberg Worley’s facility in Stavanger to carry out upgrading. The upgrade includes an overhaul of the turret, pipes, process equipment, hulls, marine systems, living quarters, control, and security systems.

Under the previous schedule, the “new” Jotun FPSO was supposed to arrive between the Balder FPSO and the Ringhorne platform during the summer of 2022. However, it is now unclear whether the project delays apply to the FPSO arrival.

Despite reporting delays related to part deliveries, Vår Energi at the time still believed that the project could be carried out with a production start date in the second half of 2022.

However, Mime Petroleum’s update now reveals that the situation has changed and the project will suffer further delays.

Offshore Energy has also reached out to Vår Energi, seeking confirmation of these dates and further details about the project’s progress.

A spokesperson for Vår Energi told us that more than one year of continued and strict corona measures imposed to limit the spread of the virus, combined with added work scope, has resulted in challenges to project progress.

The spokesperson added: “Vår Energi is currently revising the project plan to evaluate the long-term impact on schedule and cost. This work is ongoing, and it is too early to make any conclusions at this stage”.

The spokesperson also pointed out that, following the recent success of the King/Prince exploration wells, which found 60 to 135 million barrels of recoverable reserves, the company is also evaluating these discoveries as possible tie-ins to the FPSO.

Mime Petroleum also reiterated that, based on the sources of capital available to the company, it is fully financed until Balder Future project first oil.

The most recent update related to the Balder Future project came from 4Subsea earlier in June 2021. Namely, the company secured a service agreement with Vår Energi to monitor and analyse wellhead integrity to ensure safe operations for the Balder Future drilling and completion operations. Under the three-year deal, 4Subsea will monitor the West Phoenix drilling rig.