The Norwegian Petroleum Directorate (NPD) released a report appraising five field developments on the Norwegian Continental Shelf with investments exceeding NOK 10 billion (approximately US$1.7 billion). The report examines five fields on the Norwegian Continental Shelf (NCS) – Skarv; Yme; Valhall redevelopment; Tyrihans; and Gjøa - and examines why they have or have not met budgets.
“We believe that the experience gained from these projects can be transferred to other projects. It is therefore important that the industry studies the findings in our report,” says director Arne Holhjem in the NPD.
Completed on assignment from the Norwegian Ministry of Petroleum and Energy (MPE), the report stated that development costs associated with the majority of Norwegian Continental Shelf projects land within the range of uncertainty (20%) stated within their plans for development and operation (PDO).
Yme, Valhall redevelopment and Skarv have the largest cost overruns, according to the report.
Production from the relatively-small Yme oilfield, located in the North Sea 100km off the coast of Norway, was sidelined after operator Talisman had to remove a faulty platform in May of this year. It plans to submit a new plan for installation by the first half of 2015. As of May, Yme cost US$1.72-1.89 billion more than planned and has been sitting for three years, waiting to be scrapped by contractor SBM Offshore.
BP is the operator of the Skarv field, approximately 210km west of the Norwegian coast in water depths of approximately 350-450m. The company submitted a PDO for the oilfield in 2007, with production originally slated for 2011. Complications including pipeline leaks in the floating production, storage and offloading vessel (FPSO), and limited access to equipment and services from engineering following the delay impeded the production start until December 31, 2012.
It was reported at the time that the pipeline leakage alone could tack an additional NOK 10 billion (nearly US$1.7 billion) onto the project. With its adjacent oilfield, Idun, the two are estimated to contain about 100MMbbl of oil and condensate and about 48 billion cu. m (1.5Tcf) of rich gas.
Brought online in 1982, the Valhall redevelopment project was designed to allow the field to remain in production until 2050; the original platforms had a design life of 15 years. Offshore the southern part of the North Sea, Valhall’s redevelopment was also plagued with platform issues. Existing operations were to be transferred to a new platform in 2006, with production was originally set for late 2010. Operations were delayed until January 2013, and operator BP drew first oil in March.
The NPD report noted that their findings showed all projects were built during a tighter market, and that the higher level of activity exposed them to overruns.
The most important causes to delays were in planning; contract strategy; along with supplier and project follow-up, the report continued.
“Now we in the NPD have to work through these findings to see how this will impact our follow-up efforts in connection with field developments,” Holhjem said.
Yme field is operated by Talisman with a 60% stake. Its partners are Lotos Exploration and Production (20%), Wintershall (10%) and Norske AEDC (10%).
BP is the operator of Skarv, with a 23.875 stake in ownership. Its partners in the project are E.ON E&P (28.0825%) and PGNiG Norway (11.9175%).
BP operates Valhall with a 35.9% interest. Hess Norge holds 64.1% interest in the field.
Pictured is Yme's mobile offshore production unit, set to be removed in the first half of 2015.
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