Technical issues, currency movements raise costs of Equinor offshore Norway projects

Equinor’s Norwegian Contour: Technical Issues and Currency Fluctuations Complicate Offshore Projects

In recent years, Equinor, a prominent player in Norway’s offshore energy sector, has faced numerous challenges that have significantly impacted the cost of its ongoing field developments. Technical issues and currency fluctuations are at the forefront of these complications, illustrating the complexities of maintaining profit and efficiency in a dynamic pricing environment.

#### Operational Challenges

Equinor is actively engaged in 19 projects currently under development in Norway. The Ministry of Energy has listed the status of 13 of these projects, including those that have either recently completed or are in the middle of development. These projects collectively carry an estimated cost of NOK198 billion (approximately $18.62 billion), encompassing costs from commencement to commissioning.

### Cost Escalations

Project managers at Equinor have reported a roughly 3% cost increase over the past year, amounting to NOK6.5 billion ($611 million). Since the plans for development and operation (PDOs) were issued, the overall cost escalation has been more pronounced, totaling NOK32.9 billion ($3.09 billion). A significant portion of this hike—approximately NOK12.4 billion ($116.5 million)—can be attributed to currency fluctuations.

### Specific Project Highlights

Two projects stand out for their notably higher cost increases. The first is the Johan Castberg project in the Barents Sea, which involves a forthcoming FPSO deployment. This project has witnessed a post-PDO cost hike exceeding 20%. The primary reasons behind this escalation include a longer-than-anticipated stay of the FPSO at Aker Solutions’ Stord yard, coupled with currency effects and general cost rises. The total cost increase since last year totals NOK2.2 billion ($207 million), with nearly $800 million attributed to currency fluctuations. Since the PDO, estimated costs have risen by almost $2.41 billion, of which $761 million is currency-related.

The second highlighted project is Oseberg gas Phase 2 and power from shore (OGP). This initiative involves partial electrification of the Oseberg Field Center and the installation of a new compressor module. Over the past year, costs have risen by NOK1.2 billion ($113 million), and since the PDO, approximately NOK2.5 billion ($235 million) in additional costs have been incurred