Equinor ASA said Monday the Snøhvit Future project is now expected to cost NOK 5.3 billion ($526.05 million) more than the original investment estimate three years ago and that the project would take longer to complete.
Snøhvit Future, approved by Norwegian authorities 2023, consists of onshore compression to ensure the flow of gas from the Snøhvit field on Norway’s side of the Barents Sea and electrification at the connected Hammerfest LNG on the Norwegian island of Melkøya to curb emissions. Equinor expects electrification to cut the liquefaction plant’s carbon dioxide emissions by 850,000 tonnes a year, equivalent to two percent of Norway’s annual emissions.
The Norwegian majority state-owned company previously set 2028 and 2030 as completion dates for the onshore compression and electrification respectively.
“Onshore compression is now expected to start in 2029, one year after the original plan”, Equinor said in a statement on its website. The statement did not say whether the shift to electrified operation at Hammerfest LNG would also be delayed.
It said the “worse than normal” winter in 2024-25 limited work “in certain areas of the plant”. Additionally an extended summer turnaround in 2025 “postponed the resumption of project work on Melkøya”.
Meanwhile the cost estimate has now been raised to over NOK 20 billion. “When the PDO [plan for development and operation] was submitted to the authorities in 2022, the original cost estimate was NOK 13.2 billion”, Equinor noted. “Adjusted for inflation, this corresponds to NOK 14.7 billion”.
Equinor cited “increased engineering costs due to more complex integration into existing facilities”.
It added, “High inflation has led to a significant increase in costs for the acquisition of equipment”.
“Snøhvit Future is about halfway completed”, said Trond Bokn, Equinor senior vice president for project development. “It is demanding to execute such a large project in an operating plant. In addition, there has been an extensive turnaround at Melkøya this year, and we underestimated the complexity of planning and executing the project under these circumstances. We also had temporary safety shutdowns that have affected progress”.
Equinor noted Snøhvit Future had not been ready for the autumnal reporting of updated cost estimates for Norway’s national budget “but it was communicated that investments would increase”.
Snøhvit, the first hydrocarbon development in the Barents Sea according to Equinor, has been producing since 2007.
Hammerfest LNG, put onstream 2027 and restarted 2022 after a 2020 fire, cools gas into liquefied natural gas for export overseas. It has a declared production capacity of 6.5 billion cubic meters (229.55 billion cubic feet) a year.
Snøhvit supplies the liquefaction plant via a 143-kilometer (88.86 miles) pipeline. Feed gas began flowing from the Askeladd field December 2022.
Earlier this year Equinor put onstream a new source field. The NOK 3-billion Askeladd West holds recoverable volumes of about 15 Bcm, according to Equinor.
Equinor operates Snøhvit with a 36.79 percent stake. Petoro AS, also state-owned, owns 30 percent. TotaEnergies SE holds 18.4 percent, Var Energi ASA 12 percent and Harbour Energy PLC 2.81 percent.
To contact the author, email jov.onsat@rigzone.com
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