Equinor's problems at the challenging Martin Linge development off Norway are mounting with ballooning costs, a likely delay in first output and well integrity issues creating uncertainty over how much of the planned oil and gas can be produced.

Upstream has learned that that the project cost has more than doubled since the plan of development and operation (PDO) was submitted in 2012.

The state-controlled company is to reveal the increase in Norway’s proposed national budget, which to be made public on 7 October.

When the 2012 PDO was submitted, then-operator Total estimated the project cost at Nkr25.7 billion ($2.71 billion on current exchange rates).

However, accounting for inflation, the estimated costs had increased to Nkr30.4 billion when new operator Equinor presented the figures for the 2019 national budget, after taking over as operator in 2018.

Last October, Equinor revealed that costs have ballooned to more than Nkr56 billion — 85% higher than the Nkr30.4 billion estimate and more than double the figure pesented by Total in 2012.

Several sources with knowledge of the matter have told Upstream that the project will now have a cost overrun of more than 100% compared to the original plan.

Last year, Equinor launched a revised development plan for Martin Linge, aiming for production start-up this year.

However, new problems have continued to emerge and, according to Upstream sources, production will not start until mid-2021 at the earliest.

An Equinor spokesman declined to comment on the apparent cost overruns and timing of production start-up.

The operator has extended a lease for the semi-submersible floating accommodation unit Floatel Endurance until January, which suggests that much work remains to be completed on the platform topsides.

An Equinor spokesman told Upstream there are currently 650 people on Martin Linge carrying out commissioning activities.

However, the main concern for the project is related to the production wells.

Last month, Equinor revealed it had closed four pre-drilled gas production wells due to uncertainty regarding well integrity.

The operator is now planning to drill five new wells in an effort to avoid revising its reserves estimate of 260 million barrels of oil equivalent.

It plans to drill slimmer wells than those drilled by former operator Total between 2014 and 2017.

The operator has informed Norwegian authorities that new information regarding the stability of the overlying formation — or overburden — and issues regarding reservoir pressure have increased the potential for lower reserves recovery.

One possibility is that it will not be able to produce sufficiently from the Martin Linge East reservoir, which holds 50% of the field's reserves.

However, an Equinor spokesman told Upstream that the operator hopes the new wells — which will cost about Nkr2 billion — will ensure sufficient production levels.

“We have established an expert task force to understand the overburden issues and changed the well design with consideration of the challenges with the overburden,” the spokesman said.

He claimed that information gleaned from an examination of the well integrity issues have been taken into consideration when planning the three replacement wells and the two additional wells the operator plans to drill within the next year.

Another issue with the four gas wells is that Equinor cannot verify whether it has two well-functioning barriers as required by Norwegian regulations.

However, a spokesman from Norway’s Petroleum Safety Authority confirmed it had allowed Equinor to keep the wells plugged with a glass plug — a type of plugging device that can be removed with a small explosive charge — until it manages to produce from the Martin Linge East reservoir, after which pressure will reduce.

Former operator Total said last month that the four gas wells it drilled at Martin Linge were handed over to Equinor in a safe condition, with adequate well barriers compliant with industry standards.

Sources told Upstream that Equinor is likely to explore the possibility of taking legal action in an effort to recover some of the costs covered by the former operator.

Neither Equinor nor Total would comment on the matter.

In 2018, Equinor paid Total Nkr4 billion to take over its stakes in the troubled field and a position in the small gas discovery at Garantiana.

It remains unclear why Equinor did not discover any issues with the well design earlier as the company has been a partner in the project from the start.

One of the challenges with well integrity relates to problems with the Kyrre formation, which overlies the gas-bearing Brent structure.

Equinor has experienced severe mud losses in this complex formation, which is described as intensely faulted and contains a so-called gas cloud, which means high total volumes of gas are present but the output speed would be slow.

Field Development

Equinor set for new cost hike at beleaguered oil and gas project off Norway