Norway's Equinor, Vaar warn of cost overruns in oil projects

OSLO (Reuters) -Equinor and the Norwegian unit of Eni on Tuesday both warned of soaring costs at two major oilfield developments in Norway, blaming inflation, currency weakness and follow-on effects from the pandemic.

Equinor said it had raised the cost estimate for the Johan Castberg oilfield in the Arctic Barents Sea by close to 13 billion Norwegian crowns ($1.20 billion), one of several increases since the project's 2017 inception.

"Costs are increasing due to a larger than expected scope of work and cost increases in the industry," Equinor said in a statement.

The Castberg field's planned start of output was maintained for the fourth quarter of 2024 and output is expected to last for 30 years, Equinor said.

The updated project cost estimate is now 80 billion Norwegian crowns, an increase of close to 13 billion since last year and up from 57 billion projected when the Castberg development was launched in 2017.

In addition to delays during the pandemic, the cost of offshore drilling and project completion have also risen, the company added.

The Castberg floating production, storage and offloading vessel (FPSO) is designed to produce close to 190,000 barrels of oil per day from the field, and is considered profitable at oil prices above $35 per barrel, Equinor said.

Equinor has a 50% stake in the development while Eni's Norwegian unit Vaar Energi owns 30% and state oil firm Petoro, 20%.

BALDER X

Vaar meanwhile said its Balder X development in the North Sea would cost the company some $340 million more to complete than originally projected.

It owns 90% of Balder X while Mime Petroleum holds the remaining 10%. The companies maintained a planned oil production startup in the third quarter of 2024.

Vaar's Breidablikk project is now likely to start-up in the fourth quarter this year, earlier than the planned first quarter 2024.

The company trimmed its full-year 2023 output guidance, expecting production in a range of 210,000-220,000 barrels of oil equivalent per day, down from 210,000-230,000 boed seen previously.

Vaar's share price was 2% lower by 0712 GMT while Equinor's had inched up 0.2%.

($1 = 10.8150 Norwegian crowns)

(Reporting by Terje Solsvik; Editing by Muralikumar Anantharaman, Kirsten Donovan)