Norway defers 12 offshore developments

Norway's government has forced a 1-year delay in 12 planned offshore developments in a bid to control its investment commitments.

The Ministry of Petroleum and Energy said oil companies had planned to spend a total 67 billion kroner ($9.2 billion) on offshore development work this year.

The ministry said the figure had risen by 13 billion kroner ($1.8 billion) since planned projects were first slated because of expansions of some projects and increased costs through high drilling rig and other service sector rates. An overstretched Norwegian oil sector can be seen in shortages in some categories of labor, rig rates at record levels, full capacity utilization in parts of the supply sector, and a clear trend of increased costs.

The delay

Marit Arnstad, minister of petroleum and energy, said, "Government has decided to approve all projects in the normal manner, but with an adjusted implementation plan, where the start-up of investment for all fields under consideration is shifted 1 year from 1998 to 1999."

Arnstad said the government will not establish a queue for development projects and would not tamper with planned investment in new pipelines and onshore facilities or fields in production or under development.

A ministry official said that four of the delayed projects are large enough to require the decision to delay development to be debated in Storting, the Norwegian parliament. The debate is due by mid-April.

The official said the operators concerned will have time beforehand to voice their views, but that they are expected to accept the decision.

The four large projects held back are: Snorre B platform, operated by Saga Petroleum AS; Gullfaks subsea satellites, operated by Statoil; and Fram and Grane new field developments, where Norsk Hydro AS is operator.

Other projects put on hold are: Statoil's Huldra, Heidrun North, and Yme Beta developments; Saga's H-Central and Tordis extension; Saga's and Statoil's Sygna development; BP Norge AS's Ula extension; and Amoco Norway AS's Valhall water injection scheme.

The ministry said, "The effect of shifting start-up of investments for all fields under consideration by 1 year will be a reduction in investments by approximately 5 billion kroner ($690 million) this year and approximately 12 billion kroner ($1.7 billion) next year."

Snorre B

Anders Utne, Saga's executive vice-president, said that, while he would have preferred to keep to the planned schedule for the Snorre B project, the delay means there is still likely to be a green light for the project.

"The most important consideration for us," said Utne, "is that we will be able to award contracts to the companies we have selected as principal contractors. At the same time, we will be able to use 1998 for optimization studies.

"Our plan is to present a proposal at the end of March which will hopefully receive support from the license management committee. Deals can then be signed and engineering work continue, with the aim of starting construction in 1999. This will mean postponing a start to production on Snorre B from Oct. 1, 2000, to late August/early September 2001."

Saga intends to develop the northern part of Block 34/4 Snorre field with a production semisubmersible and subsea facilities (OGJ, Oct. 13, 1997, p. 37).

"Coming on stream in 2000, as we had originally planned," said Utne, "would have yielded a better result, in terms of project economics. On the other hand, we must respect the fact that Norway's economy is at boiling point."