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New costs hike for Martin Linge

Total sees further overrun on troubled field project off Norway but other schemes see reversal of rising costs trend

Total has now seen costs on its under-development Martin Linge field project off Norway balloon by more than Nkr12.1 billion ($1.5 billion) after a further hike over the past year amid fabrication delays.

The latest increase of Nkr1.36 billion, revealed in state budget figures released on Thursday, takes total costs on the troubled scheme to Nkr41.3 billion, compared with the original budget estimate of Nkr29.2 billion in the plan for development and operation (PDO) approved in 2012, a 42% increase.

The cost overrun has been attributed to higher costs and delays on construction of the Martin Linge platform topside modules at South Korean yard Samsung Heavy Industries where work was further hit by a fatal crane accident earlier this year.

“Longer time required to complete the modules in Korea and renegotiation of contracts has contributed to higher costs. These costs have also increased due to a higher number of personnel involved in completion and start-up,” the Petroleum & Energy Ministry stated in its budget document.

Start-up of the North Sea field is now scheduled for the first half of 2019 after the French operator recently disclosed a further one-year delay on the project. The field was originally due on stream last year.

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However, costs on other field development projects off Norway have actually fallen on lower contractor pricing, as well as measures such as improved project management and drilling efficiency, to largely reverse an earlier trend of cost overruns.

Costs on the first phase of Statoil’s giant Johan Sverdrup scheme in the North Sea have been cut by a further Nkr6.9 billion since last year, giving an overall reduction of more than Nkr22 billion, or 18%, to Nkr102.6 billion in total investments, compared with an original PDO estimate of Nkr124.6 billion.

The state-controlled operator has also achieved a Nkr953 million reduction in investments on its Oseberg Vestflankan 2 project, where overall expenses have been cut by around Nkr1.1 billion, or 13%, to around Nkr7.1 billion.

Furthermore, Statoil has reined in an earlier costs hike on its Aasta Hansteen gas field scheme in the Norwegian Sea after achieving a cut of more than Nkr1 billion over the past year to give a revised investment figure of Nkr38 billion, which is still around Nkr4 billion, or 12%, higher than the original budget.

In addition, Wintershall has reaped the benefit of efficiencies and cost-cutting on its Maria field project in the Norwegian Sea where costs have come down by a further Nkr2.9 billion over the past year to achieve an overall reduction of Nkr3.1 billion, or 19%, to Nkr13.1 billion compared with the PDO figure of Nkr16.2 billion.

The German operator has also accelerated progress on the project to reduce the time to first oil, with the field now scheduled for start-up by year-end.

The four projects have therefore seen a combined cost reduction of more than Nkr11.7 billion since last year.

The ministry said 14 of 17 projects under development had cost estimates within a specified 20% margin of uncertainty and that total investment costs of Nkr14.6 billion were 4% lower than combined PDO estimates.