Johan Castberg project update
The Johan Castberg partnership, consisting of Equinor, Vår Energi and Petoro, is today updating the project cost estimate. The investment estimate has increased by almost NOK 13 billion since last year.
Our plan for production start in the fourth quarter of 2024 remains unchanged.
“Costs are increasing due to a larger than expected scope of work and cost increases in the industry, we take this seriously. However, Johan Castberg is still a good project with a solid economy. With a breakeven of around USD* 35 per barrel, Johan Castberg will provide substantial revenue and ripple effects to the community from the Barents Sea for 30 years,” says Geir Tungesvik, Equinor’s executive vice president for Projects, Drilling & Procurement.
In 2022, the Johan Castberg hull, including living quarters, was transported from Singapore to Stord for installation and commissioning. The main reason for the rise in the investment estimate from last year is that the workload transferred to Stord has been more comprehensive and complex than estimated. In addition, the project has not progressed as planned. Due to the market cost development the marine operations, drilling and completion costs have also increased.
When the plan for development and operation (PDO) was submitted in 2017, the cost estimate was NOK 57 billion (2023). The updated project cost estimate is now NOK 80 billion. Project costs have risen by NOK 15.5 billion, in addition to a currency effect of just above NOK 7 billion.
Infection control measures and reduced access to labour in connection with the Covid-19 pandemic affected the project, both in Singapore, where the hull and living quarters for the production vessel were constructed, and at Norwegian yards constructing modules for the production facility.
Proven volumes in Johan Castberg are estimated at between 450 and 650 million barrels of oil. The vessel is designed for a daily production of close to 190 000 barrels.
Every day around 2000 people work on completing the FPSO at Stord. In the operations phase Johan Castberg will provide jobs, ripple effects and revenue to the community for 30 years. Johan Castberg is estimated to require 1700 person-years of work during the operations phase, of which 500 will be in Northern Norway.
*Break-even is discounted to 2017 when plan for development and production was delivered.