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Providing coverage of Alaska and northern Canada's oil and gas industry
October 2008

Vol. 13, No. 43 Week of October 26, 2008

Our Arctic Neighbors: Costs soaring for Norway’s Snohvit LNG project

StatoilHydro has revised its investment estimate for phase 1 of the Snohvit offshore Arctic LNG project up to a total of NOK 48.1 billion ($7.3 billion), an increase of NOK 3 billion ($455.3 million) compared to the September 2005 estimate, the company said in a release Oct. 15. The first of four phases is development and startup. The LNG plant onshore at Melkoya came on-stream in September 2007 but has been undergoing technical difficulties. All the additional expenses relate to completion of the plant.

Since a scheduled shutdown at Melkoya this summer, Snohvit has maintained stable production at around 80 percent of planned capacity, according to StatoilHydro. “During a scheduled shutdown in October 2008 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 and carbon dioxide,” the company said.

The cost of phases two to four — scheduled for the period 2015 to 2032 — has also been revised upwards, to NOK 20.8 billion ($3.2 billion), which is NOK 7.5 billion ($1.1 billion) higher than the 2005 estimate. “The increase is in its entirety due to the cost of development related to for example drilling rigs and other material,” the company said. “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. Hence the uncertainty of this estimate is considerable. Snohvit is still a highly profitable and attractive project.”

—Sarah Hurst






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