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Call to curb overruns

February 4, 1999, 08:00 CET

A call to reduce uncertainties which can boost offshore development costs has been sounded by Norway's petroleum and energy minister.

Marit Arnstad also said that improvement efforts initiated by the Norsok study on the competitiveness of Norway's offshore sector in the mid-1990s must be maintained.

She was speaking at a press conference held in Stavanger on 3 February to present the findings of an official analysis of investment on the Norwegian continental shelf over the past four years.

Compiled by a government-appointed commission of inquiry, this report aims primarily to identify why spending on a number of developments has risen in relation to the original plans.

Thirteen of the 36 projects registered in 1994-98 were subject to detailed scrutiny. Accounting for 65 per cent of Norway's offshore investment in the period, these developments recorded overall cost overruns of NOK 30 billion or roughly 27 per cent.

The projects selected for analysis include several operated by Statoil, among them Åsgard in the Norwegian Sea and expansion of the Kårstø gas treatment complex north of Stavanger.

One aim of the Norsok process, initiated five years ago, was to reduce cost and execution time for offshore projects in order to improve earnings.

Goals formulated included a 40-50 per cent cut in time and costs by the end of 1998 compared with best practice in 1993. At the same time, Norway's offshore sector was to maintain its leading position in efforts to improve health, the environment and safety.

Substantial cost reductions and improved project execution have been achieved through Norsok. But Ms Arnstad called for a new phase to begin in this process by seeking to cure a number of teething troubles while continuing to pursue the existing objectives.

"Norsok has prompted major changes in project implementation along with the development of new technology," she noted.

Returning to earlier methods of pursuing offshore developments was not a target, the minister added. Instead, everyone involved had to work to reduce uncertainties associated with such projects and ensure that they are solidly founded.