Management change: Karl Erik Kjelstad takes the helm to rein in costs
Olsen's out in Aker bid to salvage ship
Svein Olsen has stepped aside as chief of Aker Floating Production, with Karl Erik Kjelstad taking his place as interim chief of the Norwegian company, as it fights to control spiralling cost overruns on the Aker Smart 1 floating production, storage and offloading vessel conversion.
“Project costs have risen significantly and repeatedly,” said Aker Floating Production chief Martinus Brandal.
Analyst Frederik Lunde with Carnegie in Oslo said Aker Floating Production reported another 10% cost overrun on the Aker Smart-1, being built for Indian producer Reliance Industries.
Negotiations are ongoing with Reliance to reclaim some of the cost increase.
The Aker Smart 1 is meant to be leased to Reliance Industries on a 10-year contract for the MA field off India.
The initial goal was to being production in April, but this date was pushed back to the second quarter of this year after the first 10% cost overrun was reported in March.
"The delay and cost increase is mainly due to the generally constrained manufacturing and supply market, and lack of resources at Jurong Shipyard in Singapore, which has a knock-on effect to the project," Aker Floating Production said at the time.
Aker Floating Production has the option of seeking bridge funding or financing from its parent company, Aker.
While clarification on financing is not expected until the third quarter of this year, the company says it still expects to be able to deliver the vessel on schedule – in the second quarter.
Kjelstad was previously Aker Floating Production’s head of its Maritime Technologies sector.
"Aker Floating Production‘s Board expresses its gratitude to Aker for its decisive action in releasing core management resources to Aker Floating Production," Brandal said.