Equinor Energy AS said the estimated investment costs for its flagship Johan Castberg project have risen by almost $1.2 billion (NOK 13 billion) since last year to $7.38 billion (NOK 80 billion) .
However, the start of production is still planned for the fourth quarter, Equinor said in a press release on Tuesday.
The main reason for the increase in the investment estimate compared to last year is that the workload transferred to Stord has been more comprehensive and complex than estimated, Equinor said. Offshore operations, drilling and completion costs have also increased due to “market cost developments” and “the project has not progressed as planned”, Equinor said.
Johan Castberg is located about 62.1 miles (100 kilometers) north of the Snohvit field in the Barents Sea, in water depths of 1,181 to 1,279.5 feet (360 to 390 meters). The asset is a subsea field with 30 wells spread over 10 templates and two satellites tied to a floating production, storage and offloading (FPSO) vessel, according to Equinor. The owners of the license are Equinor, which operates the field with a 50 percent interest, Var Energi ASA with a 30 percent interest and Petoro AS with a 20 percent interest.
In 2022, the Johan Castberg FPSO hull, including housing, was transported from Singapore to Stord for installation and commissioning. Infection control measures and reduced access to labor related to the COVID-19 pandemic affected the project, in Singapore and the Norwegian yards building modules for the production facility, Equinor said.
Equinor said that when the project’s development and operation plan was submitted in 2017, the estimated cost was $5.26 billion (NOK 57 billion). Project costs have increased by $1.43 billion (NOK 15.5 billion), plus a foreign exchange effect of just over $0.65 billion (NOK 7 billion).
“Costs are rising due to a larger than expected scope of work and cost increases in the industry; we take it seriously,” said Geir Tungesvik, Equinor’s Executive Vice President Projects, Drilling and Acquisition. “However, Johan Castberg remains a good project with solid economics. Breakeven at around $35 per barrel , Johan Castberg will provide substantial income and dominant effects to the Barents Sea community for 30 years.”
Tested volumes at Johan Castberg are estimated at 450 to 650 million barrels of oil. The FPSO vessel is designed for a daily output of almost 190,000 barrels, Equinor said, adding that the project will have a supply base and helicopters at Hammerfest, which is 149 miles (240 kilometers) away, and an operations organization in Harstad.
Every day around 2000 people work to complete the FPSO at Stord, Equinor noted. It is estimated that Johan Castberg will need 1,700 person-years of work during the operations phase, of which 500 will be in northern Norway.
Acquisition of onshore wind power in Poland
Meanwhile, Equinor acquired a 26-megawatt onshore wind farm in Poland from Helios Group, in a bid to expand its extensive offering in Poland and fulfill its market-driven power production strategy, the company said in a press release earlier this month. The Wilko wind farm is located in the province of Wielkopolska and will be operated by Wento, Equinor’s subsidiary in Poland.
Equinor said the asset will provide immediate production and cash flow, estimating cumulative annual production at 105 gigawatt-hours of energy per year, equivalent to the electricity consumption of about 50,000 Polish homes.
“Equinor’s renewable strategy aims to offer flexible energy from multi-technology positions in select markets,” said Olav Kolbeinstveit, Senior Vice President of Onshore and Renewable Energy Markets at Equinor. “Through our subsidiary Wento, we have built a strong solar portfolio in Poland. By adding onshore wind to Wento’s portfolio of operated assets, we transform Wento into a multi-technology power producer.”
“Diversification of generation sources and energy supplies is key to successfully decarbonizing Poland’s energy system and improving its energy security,” said Equinor Poland Country Director Michał Jerzy Kołodziejczyk. “With this agreement, we can further expand our extensive energy offer in Poland, which includes gas supplies via the Baltic Pipe, large-scale offshore wind projects, solar power and now also onshore wind.”
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