Costs rise for StatoilHydro's Snohvit LNG project

StatoilHydro has increased the estimate of its investment costs for the first phase of the Snohvit LNG project in the Barents Sea by 3 billion kroner.

Uchenna Izundu
International Editor

LONDON, Oct. 21 -- StatoilHydro has increased the estimate of its investment costs for the first phase of the Snohvit LNG project in the Barents Sea by 3 billion kroner because of problems associated with delivering the full 4.3 million tonnes/year of LNG capacity at the onshore liquefaction plant.

On Oct. 16, the company presented a revised budget to Norwegian authorities and stressed that Snohvit was a technically challenging project that had exceeded the September 2005 estimate of 48.1 billion kroner in nominal terms. "Snohvit is still a highly profitable and attractive project," it said.

Snovhit started production last September but has struggled to regularly deliver at full capacity. Since the scheduled shutdown this summer Snohvit has maintained stable production at about 80% of its planned capacity. During a scheduled shutdown in October, it said, "A number of measures will be implemented to improve the regularity of the plant, including the replacement of seawater coolers and measures to limit the emission of nitrogen oxide (NOx) and CO2," StatoilHydro said (OGJ Online, Oct. 4, 2008).

StatoilHydro will investigate different solutions to reconfigure the plant and to ensure stable and safe operations. These options could cost 2.5-5.5 billion kroner, depending on the option chosen.

StatoilHydro said it would make a final decision in 2009 after it carries out further analysis of the plant's performance.

The company has shut down production from the field for 30 days to replace two heat exchangers that contributed to the problems in reaching the plant's full capacity, a company spokesman told OGJ (OGJ Online, Oct. 15, 2008).

Snohvit will be developed in four phases, and the costs for future development have also substantially increased by 7.5 bilion kroner for 2015-32. Phases 2-4 are expected to hit 20.8 billion kroner because of rising materials costs, including drilling rig costs.

StatoilHydro said the cost estimate is uncertain: "No contracts have been signed for this work. A final concept choice has still not been made for the future compression solution on the field."

Snohvit partners are StatoilHydro 33.53%, Petoro 30%, Total SA 18.4%, Gaz de France 12%, Hess Corp. 3.26%, and RWE Dea 2.81%.

Contact Uchenna Izundu at uchennai@pennwell.com.

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