Equinor (OSLO: EQNR) has seen costs for its Johan Castberg oil project in Norway surge by NOK 13 billion since last year (£970m).
The headline cost, taking into account for currency exchanges, is even higher.
Last year, the Johan Castberg FPSO hull, including living quarters, was transferred to Stord from Singapore for commissioning.
The main reason for the cost increase is that the workload “has been more comprehensive and complex than estimated,” said Equinor.
On top of that, the project “has not progressed as planned”, with marine operations drilling and completion costs having all increased.
Equinor also cited “reduced access to Labour” linked to the Covid pandemic, both in Singapore, where the hull and living quarters were constructed, and in the Norwegian yards.
The huge development, with estimates volumes of 450-650m barrels, is still expected to come online next year and produce for 30 years.
“Costs are increasing due to a larger than expected scope of work and cost increases in the industry, we take this seriously,” said Equinor exec vice president for projects Geir Tungesvik.
“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.”
The project was initially estimated at NOK 57 billion when plans were submitted in 2017.
Overall costs have risen by NOK 15.5bn, in addition to currency effects of NOK 7 billion, to a total of NOK 80 billion (£5.97bn).
Equinor, which is majority controlled by the Norwegian state is 50% operator with a 50% stake.
The remainder is held by Var Energi (30%) and Petoro AS (20%).
£850m cost increase for Balder X
Var Energi (OSLO: VAR) said today that its share of the Johan Castberg costs have increased by NOK 4 billion in the last year (£298.5m) on a net pre-tax basis, with the majority of that cost to be felt in 2024.
Elsewhere its Balder X development in the North Sea, a life extension to the existing Jotun FPSO, has seen costs increase by NOK 11.5bn (£850m).
Var Energi said the costs are linked to additional engineering and construction scope of the Jotun FPSO, along with factors including Covid-19, weather windows, and cost inflation.
Balder X is expected to unlock an estimated 143 million barrels of recoverable reserves, with additional tie-ins through the King and Prince discoveries.