Statoil now also faces rising costs on Aasgard B development

Apr 17, 1998 02:00 AM

Norwegian Statoil is facing ever more rising costs on its giant Aasgard development, following the news that construction of the Aasgard B semi-submersible gas production platform is to rise by an additional NKr 1.4 bn ($ 187 mm).
Further cost increases in drilling on the project are expected, although a final figure is not expected until May.
The oil company and contractor Kvaerner will split the extra costs in the project, a spokesman for Statoil said.
Kvaerner won the contract for Aasgard B with a NKr 6.6 bn bid. This bid was well below the NKr 8.2 bn-NKr 8.4 bn Statoil had budgeted for the development.
Market sources have expressed growing concern at the tight margins on several Kvaerner projects. In addition to the Aasgard contract, analysts have raised fears over the Siri platform for Statoil and the turnkey project for the production barge for Esso's Jotun field.
Referring to Jotun, a Kvaerner spokeswoman said: "We have agreed a delivery date and we have good relations with Esso. I couldn't comment on exact figures."
She added that the Aasgard B construction was 15-16 % complete and said that the cost overruns were a one off. "Its not a case of costs snowballing out of control."
Kvaerner's president Tore Bergersen has previously spoken out against the narrow margins facing contractors in the industry as being "too low to be sustainable".

Following the news of the Aasgard increases, he admitted that ambitions for the project may have been too high but said they were necessary to drive the development forward.
Statoil is already facing cost overruns on the Aasgard A. The FPSO - project costs has increased by NKr 700 mm to NKr 6.8 bn, following delays to the vessel which is under contract to Aker Maritime.
The NKr 33.8 bn project is expected to begin production on October 1, 2000.

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