Equinor and its partners in the Wisting field are facing a significant cost increase at the challenging Barents Sea development after switching the scheme's floater concept, with a new power-from-shore plan and a dilemma over gas evacuation also likely to swell the budget.

Norwegian operator Equinor and partners OMV of Austria and Swedish independent Lundin Energy have recently changed the development concept for Wisting, a choice that could lead to a price increase of up to 50% compared to the base case that was in place until the middle of last year.

In the first half of last year, Equinor had planned on deploying a ship-shaped floating production, storage and offloading unit at Wisting, similar to its Johan Castberg FPSO, also offshore Norway.

In June, however, Norway's parliament announced that oil and gas production would get a temporary tax relief package for projects sanctioned before end of 2022. The tax relief means that the Norwegian state covers about 90% of capital expenditure of new projects while oil companies still receives 22% of the profit.

Now, Equinor has scrapped the ship-shaped FPSO concept in favour of a circular Sevan-type floater, which will allow for power from shore.

The previous concept for development had, according to several sources familiar with the project, a price tag of approximately Nkr50 billion ($5.89 billion).

In a document seen by Upstream, however, Equinor now estimates the cost for Wisting to be between that figure and Nkr75 billion ($8.83 billion). The document is a suggestion for an impact assessment report, which is an initial part of the plan of development and operation for the field.

An Equinor spokesman said that more work is needed before the final concept is selected. He did, however, confirm that the licence partners have decided to mature a concept with a circular unit.

“The range in our [cost] estimates reflects uncertainty regarding the final concept selection,” he said.

Several well-placed sources told Upstream that the new floater concept with power from shore will increase costs significantly.

“Equinor chose the Sevan floater because it allows for power from shore, which is more complicated for a ship-shaped unit, due to the turret,” one source said.

The source explained that it is not possible to build a 310-kilometre alternating current power cable to the Wisting field.

“Only a direct current cable can supply Wisting with power, which means that they have to place a space-demanding and costly power transformer on the Wisting unit,” according to an industry expert on power from shore to oil and gas installations.

UK-based consultancy Wood Mackenzie has estimated that an offshore power cable costs about £1 million to £2 million ($1.36 million to $1.72 million) per kilometer. For Wisting, this would represent a cost increase of £310 million to £620 million — which in local currency is between Nkr3.8 billion and Nkr7.6 billion.

According to the suggestion for an impact assessment report, due to be released in second quarter, Equinor estimates that the cost to provide power to Wisting from shore will be between Nkr3800 and Nkr4800 per tonne of CO2 avoided.

The Norwegian government recently announced that it will raise the cost of emissions from oil and gas production to Nkr2000 ($247) per tonne by 2030. Judging by Equinor's new calculations, Wisting looks set to pay twice as much to avoid emissions.

The Norwegian Petroleum Directorate (NPD) declined to say how it will react to a Wisting development plan that would be much more expensive than Equinor’s previous base case.

“We cannot publicly comment on ongoing projects. However, in general, NPD is concerned with optimising the socio-economic value of projects,” a NPD spokesperson said.

Upstream has learned from a source familiar with the project that discussions are ongoing between NPD and Equinor on issues concerning the proposed Wisting development.

Another issue that is likely to increase costs at Wisting is the fact that the operator has failed to find a suitable storage site for re-injection of associated gas.

Reservoirs in the area are unusually shallow — only a few hundred meters below the seabed — which makes gas injection challenging due to low pressures.

Equinor is, therefore, considering exporting associated gas to its Melkoya liquefied natural gas plant. However, there is no available capacity at this facility for 20 years, which means that Equinor and its partners may instead have to use infrastructure meant for CO2 removed from gas from the Snohvit field.

Equinor’s spokesperson said that the licence partners are “in dialogue with others about different solutions for the gas”.

Upstream understands that new gas infrastructure involving either a gas pipeline to the Barents Sea or a new LNG train at Melkoya has been discussed. The Barents Sea holds significant amounts of stranded gas.

Field Development

Equinor braced for huge price hike at Wisting oil project offshore Norway