Equinor says Johan Castberg Project costs increased by $1.2B

SEPTEMBER 20, 2023

Equinor said Tuesday that the cost of the Johan Castberg oil project in the Barents Sea has increased by almost 13 billion Norwegian kroner ($1.2 billion) since last year due to higher costs for building the production vessel, the marine operations, drilling and overall completion.

The Norwegian energy major said that the plan to start production in the fourth quarter of 2024 remains unchanged, but said the overall cost of developing the project has increased from the NOK57 billion originally estimated in 2017 to NOK80 billion, with higher project costs accounting for NOK15.5 billion and currency effects making up just above NOK7 billion of the increase.

Infection control measures and reduced access to labor in connection with the coronavirus pandemic affected the project in Singapore, where the hull and living quarters for the production vessel were constructed, and at Norwegian yards production proved more complex than estimated, it said.

"Costs are increasing due to a larger than expected scope of work and cost increases in the industry," said Geir Tungesvik, Equinor's executive vice president for projects, drilling & procurement.

"However, Johan Castberg is still a good project with a solid economy. With a breakeven of around $35 per barrel, Johan Castberg will provide substantial revenue and ripple effects to the community from the Barents Sea for 30 years."

The Johan Castberg field has 30 wells that will be tied back to a floating production, storage and offloading vessel, and further exploration in the area is planned in the years ahead. Proven volumes are estimated at between 450 million and 650 million barrels of oil and the vessel is designed for daily production of close to 190,000 barrels.

Equinor, Var Energi and Petoro are partners in the project.