Equinor has pushed back a final investment decision for its Hywind Tampen floating wind development off Norway to the fourth quarter from mid-year as it struggles to meet its partners’ required rate of return for the project.

The Norwegian player is set to release its impact assessment report on Hywind Tampen in a couple of weeks.

The project aims to cut emissions from the Snorre and Gullfaks fields in the North sea by 200,000 tonnes per annum of carbon dioxide for a preliminary price tag of Nkr5 billion ($616 million).

The plan is to install 11 of Equinor’s proprietary Hywind floating wind turbines near the fields to replace some of their gas-fired power supply.

With a combined capacity of 88 megawatts, the 8 MW turbines will meet around 35% of the annual power demand of the five platforms.

Sources with knowledge of the ongoing project told Upstream that Equinor has managed to reduce the investment costs, but that it is still struggling to meet the partners’ required rate of return of 10% despite the project being heavily subsidised.

A final investment decision was planned for July 2019, but the project is not sufficiently matured to meet this schedule.

“We are planning for an investment decision during 2019, probably in the fourth quarter,” an Equinor spokesman told Upstream.

Asked about the project’s alleged difficulties in meeting return requirements, he said: “We are currently working on maturing the project, both technically and economically, towards a possible investment decision”.

The project would be the world’s first offshore wind farm directly connected to oil and gas platforms and could shave at least Nkr100 million off the annual operating costs for operator Equinor and its six field partners — Petoro, OMV, ExxonMobil, Idemitsu, DEA and Vaar Energi.

The cost savings are related to a reduction in Norway’s carbon dioxide tax.

In addition, revenues would increase somewhat as more gas would be available for export.

However, according to a source, the cost to build Hywind Tampen is still twice as high as the cost of continuing as usual with the existing gas-fired turbines on Snorre and Gullfaks.

“It does not make sense as a cost-cutting measure, nor as a climate measure. And why should the partners pay for Equinor’s technology development?,” one source asked.

Problems reaching the required rate of return for the partnership comes on top of previously known obstacles for the project posed by subsidy approval and tax issues.

It is still uncertain whether the Norwegian state’s climate agency Enova will approve Equinor’s application for a Nkr2.5 billion grant to Hywind Tampen.

This would be the largest-ever Enova grant, corresponding to almost its entire payout in 2017 of Nkr2.7 billion to more than 900 different projects.

Sources have also raised doubts whether Hywind Tampen should be considered to be within the Norwegian petroleum tax regime, which allows companies to deduct 78% of the investment cost to counter the 78% special tax levied on oil and gas production.

Weekly

Financing headwind forces delay at Equinor's Tampen