Profitable project portfolio

October 12, 2021 10:30 CEST
The Troll A platform in the North Sea
Troll phase 3 (TP3) is one of the most profitable projects in Equinor’s history. The project came on stream 27. August 2021. (Photo: Elisabeth Sahl & Jan Arne Wold - Woldcam / Equinor ASA)

Equinor is the operator of 20 projects under development in Norway. This is a solid and profitable portfolio, creating ripple effects and value all over the country, in spite of challenges related to Covid-19 for the entire industry.

In the national budget published today, the Ministry of Petroleum and Energy presents the status for selected projects that are under development or have recently come on stream. Ten Equinor-operated projects are included in this year’s list, with capital expenditures totalling more than NOK 255 billion (2021 value).

“On average, more than 70 percent of the contracts for these projects have been awarded to Norwegian contractors, securing tens of thousands of jobs all over the country in the project phase,” says Arne Sigve Nylund, Equinor’s executive vice president for Projects, Drilling & Procurement.

“For example, Johan Castberg contributes more than 46 000 work years in Norway. In addition, the field will provide jobs, ripple effects and income for Norway for 30 years,” he says.

Arne Sigve Nylund - portrait
Arne Sigve Nylund, Equinor’s executive vice president for Projects, Drilling & Procurement. (Photo: Bo B Randulff / Woldcam - Equinor ASA)

Covid-19 has made 2020 and 2021 highly challenging for the global industry. Still, several projects have come on stream in the past year. Snorre Expansion Project started up in December 2020 ahead of plan. The project is now NOK 2,65 billion below original cost estimate.  Troll phase 3, Martin Linge and Vigdis Boosting Project all came on stream this year.

“Troll phase 3 has a break-even price below 10 dollars, making it one of the most profitable projects in Equinor’s history. CO2—emissions are below 0,1 kilo per barrel,” says Nylund.

Large projects such as Johan Sverdrup phase 2, Breidablikk and Hywind Tampen are on schedule. In addition, Equinor and its partners have made investment decisions for Kristin South and Askeladd West, in addition to Troll C electrification and partial electrification of Troll B.

“The past two years with Covid-19 pandemic, infection control measures and restrictions have been challenging for the whole industry and impacted our projects. Both our own employees and the suppliers are doing a great job delivering the projects in a safe and secure manner in a highly challenging situation,” says Nylund.

In this year's national budget, three Equinor-operated projects have undergone significant changes since last year’s reporting:

The Sleipnir heavy lift vessel
Early April 2020 the world’s largest crane lifting vessel, Sleipnir, picked up a module for Snorre Expansion project quayside at Aibel, Haugesund (Photo: Øyvind Gravås & Bo B. Randulff - Woldcam / Equinor ASA)

Snorre Expansion Project (SEP)
Snorre Expansion Project, which contributes 200 million additional barrels of oil to the Snorre field, came on stream ahead of plan and below cost estimate in Q4 2020. The project has continued to reduce cost and is now estimated to be delivered NOK 2.65 billion under cost estimate in the Plan for development and operation (PDO), despite a negative currency effect.

The cost reduction is mainly related to drilling operations and the subsea scope, as well as topside modifications. Total investments are NOK 18.3 billion and the project is profitable even with significantly lower oil prices than today.

The Njord A platform
The Njord A platform has been upgraded at Aker Solutions, Stord, while the storage ship Njord Bravo has been prepared for 20 new years at Aibel, Haugesund (Photo: Lars Melkevik/Aker Solutions)

Njord Future:
Njord Future is a unique project. Both the platform and the storage vessel have been towed to shore for upgrading and preparations for another 20 years on the field. This extensive work also enables the development of the Bauge and Fenja fields, which will be tied in to the Njord A platform.

The scope of the project has grown both on the platform and the storage vessel as lifetime extension and upgrading have proved to be more extensive than previously assumed. In addition, Covid-19 infection control measures and restrictions have impacted productivity, prolonging project implementation and increasing costs. Start-up is now expected in the fourth quarter of 2022.

In spite of the cost estimate having increased by NOK 13.1 billion (80 percent) since PDO, the project is profitable at oil prices significantly lower than today.

Johan Castberg module being transported
Two large modules for Johan Castberg FPSO leaving Aker Solutions in Egersund heading for Aker Solutions at Stord. (Photo: Ørjan Richardsen & Elisabeth Sahl - Woldcam / Equinor ASA).

Johan Castberg
The start-up of the Johan Castberg project is now scheduled for the fourth quarter of 2024, with the main cause of the delay being the Covid-19 pandemic, which has particularly impacted the construction of the production vessel both in Singapore and at Norwegian yards.

The yard in Singapore has been shut down for long periods, and still has reduced access to manpower due to entry restrictions associated with Covid-19. The hull will be transported to Stord in the first quarter of 2022 for processing module installation and commissioning.

The project has also faced challenges connected to the welding quality in Singapore. These issues will be rectified before the hull leaves the yard.

Marine operations and drilling have been less impacted by Covid-19.

Since the Plan for development and operation (PDO) the cost estimate for the project has increased by NOK 1.9 billion. Furthermore, there is an estimated cost increase of near NOK 6 billion due to weakened Norwegian krone compared to the currency expectations at the time of sanction, a total cost increase of 15 percent since the PDO. The project is profitable and still has a break-even price below 35 dollars per barrel, as communicated at PDO.

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