OPINION: Equinor’s challenges with the Martin Linge field will likely have a significant negative impact for the oil and gas industry’s standing in Norway.
The state-controlled player has long been regarded as the most reliable executor of projects in the country.
Now, however, it is struggling with delays and cost overruns at Martin Linge, Njord and Johan Castberg.
The Martin Linge project is regarded by some industry observers as one of Norway's biggest oil project debacles — even worse than the Yme platform, which was scrapped without ever producing and cost Norway Nkr10 billion ($1.06 billion).
Equinor paid former operator Total Nkr4 billion for Martin Linge in 2018. Since then, costs have ballooned.
In the PDO from 2012, Total estimated that the field had a breakeven price of $57 per barrel of Brent.
With a mooted 100% cost increase, it is possible the field may never be profitable for the partners or the state.
And if Equinor fails with five new planned wells in the challenging reservoir, economic losses will swell further.
The future profitability of oil and gas in Norway is an ongoing debate. Projects such as Martin Linge, Johan Castberg and Njord will strengthen the case for those who claims oil is no longer a highly profitable business.
A generous tax relief package that ensures the state must cover 90% of costs for these failed projects, while only receiving 78% of potential return, will only add fuel to the fire among Norway's industry sceptics.
(This is an Upstream opinion article.)