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The project costs for Equinor’s Johan Castberg oil project in the Arctic waters of the Barents Sea have increased by nearly 13 billion Norwegian crowns, or by $1.2 billion, since last year, the Norwegian energy major said on Tuesday.
The project was approved back in 2018, at much lower costs, but they have risen in recent years.
“Costs are increasing due to a larger than expected scope of work and cost increases in the industry,” Geir Tungesvik, Equinor’s executive vice president for Projects, Drilling & Procurement, said in a statement today.
“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,” Tungesvik added.
Equinor and its partners in the project, Vår Energi and Petoro, continue to target a production start date at Johan Castberg in the fourth quarter of 2024.
When the plan for development and operation (PDO) for the oilfield was submitted in 2017, the cost estimate was $5.3 billion (57 billion crowns) in 2023 currency effects. The updated project cost estimate is now $7.4 billion (80 billion crowns). Project costs have risen by $1.4 billion (15.5 billion crowns), in addition to a currency effect of just above $648 million (7 billion crowns), Equinor said.
Proven volumes in Johan Castberg are estimated at between 450 and 650 million barrels of oil. The production vessel for the project is designed for a daily production of close to 190,000 barrels.
In June this year, Norway approved the development of 19 offshore oil and gas projects worth more than $18.5 billion (200 billion Norwegian crowns) in investments, as Western Europe’s top oil and gas producer looks to sustain the high production from its continental shelf. The 19 projects include new developments, additional development of producing oil and gas fields, and investments to increase resource recovery in producing fields.
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.