Costs up for Åsgard

March 19, 1999, 10:15 CET

The cost of Statoil's Åsgard development in the Norwegian Sea has risen by NOK 1.9 billion to a new estimate of NOK 39.1 billion.

When the previous cost estimate was presented last autumn, the Åsgard partners were aware that the project lay behind its original timetable.

But the project management thought it had taken adequate steps to bring the development back on schedule.

"These measures have failed to produce the expected effect," admits Henrik Carlsen, senior vice president for Exploration & Production Norway.

"We've conducted a comprehensive review of the project to obtain the best possible information about all its elements," he says. "On that basis, we've arrived at the new estimate."

The management has also been able to base this work on recommendations made recently by Norway's official commission of inquiry into offshore investment.

This body analysed developments on the Norwegian continental shelf in a bid to establish why so many of these projects have suffered from cost overruns.

The commission's report identifies several reasons for the increase in Åsgard investment. Underestimating field complexity and design inadequacies are seen as the principal factors.

Much of the cost increase for the Åsgard A oil production ship, now in position on the field, relates to the hull. Changes in production capacity, including a higher gas volume, have also contributed.

Underestimating the topside facilities on the Åsgard B gas platform, currently under construction, is a key reason for the cost overrun on this floating unit.

Total topside weight has increased, and investment in the hull is also up.

Åsgard B will be the world's largest floating offshore gas processing installation, and will handle 15 billion cubic metres per year. In addition, its oil throughput will be as large as production from Statoil's Norne field further north, which is 130 000 barrels per day.