Increase in Offshore Project Costs at Equinor, Aker BP and Vår Energi

Norwegian energy companies Equinor, Aker BP and Vår Energi see their offshore oil and gas projects undergo significant cost increases, mainly due to inflation, delays and currency fluctuations.

Share:

Comprehensive energy news coverage, updated nonstop

Annual subscription

8.25€/month*

*billed annually at 99€/year for the first year then 149,00€/year ​

Unlimited access • Archives included • Professional invoice

OTHER ACCESS OPTIONS

Monthly subscription

Unlimited access • Archives included

5.2€/month*
then 14.90€ per month thereafter

FREE ACCOUNT

3 articles offered per month

FREE

*Prices are excluding VAT, which may vary depending on your location or professional status

Since 2021: 35,000 articles • 150+ analyses per week

Norwegian energy companies Equinor, Aker BP and Vår Energi are facing notable increases in the costs of their offshore oil and gas projects. These budget revisions are primarily attributed to imported inflation, delays in project schedules, and exchange rate fluctuations. The recent Norwegian government budget highlighted these financial challenges, revealing that the three companies have upwardly adjusted their cost forecasts for several key projects.

State of Projects and Cost Details

Equinor, a leader in the Norwegian energy sector, revealed that its Johan Castberg project in the Barents Sea, initially estimated at 49 billion kroner in 2018, has seen its costs increase by 76% to now reach 86 billion kroner (approximately 8.08 billion USD). This rise is due to delays and complications encountered in Norwegian shipyards, as well as exchange rate effects. In 2024, costs increased by an additional 2.2 billion kroner compared to the previous year. Project management issues, notably the increased complexity of the construction phase, the impact of infection control measures, and the reduced availability of labor during the pandemic, contributed to this budget drift.

Aker BP, on the other hand, saw its costs for the Yggdrasil project, the largest Norwegian oil and gas development since the start of Johan Sverdrup in 2019, rise from 120.2 billion kroner to 134.4 billion kroner. This increase is mainly due to a depreciation of the Norwegian krone, leading to inflation in the costs of imported equipment. Despite these financial challenges, the project remains on track for production by 2027.

Vår Energi, for its part, faces the highest budget drift with its Balder Future project. Initially approved at 19.6 billion kroner in 2019, the project cost is now estimated at 52.2 billion kroner, more than double its initial estimate. This project has also suffered significant delays, with a start date pushed back to the second quarter of 2025.

Analysis of Cost Overruns

The main reasons for the cost overruns include supply chain issues and increased project complexity. Additional labor costs and the complexity of installation particularly impacted the Johan Castberg project. The COVID-19 pandemic also slowed work in the shipyards in Singapore, where several key modules originate. Furthermore, a weakened Norwegian krone has generated imported inflation on equipment and services, especially for large-scale projects requiring specific parts from abroad.

Aker BP is also facing legal challenges related to the approval of the Yggdrasil project by the Ministry of Energy, due to opposition from environmental groups concerned about the project’s environmental impact. These combined factors have contributed to increased costs and delays in project execution.

Strategic and Economic Consequences

The cost increases of projects could have significant impacts on the companies’ profit margins, especially in a context of volatile energy prices. Production delays also affect the long-term profitability of projects. However, Equinor emphasized that the Johan Castberg project remains profitable with a break-even point around 35 USD per barrel, well below current market levels.

These budgetary increases can also influence companies’ future investment decisions and affect their competitiveness in the international market. Delays in project schedules can lead to a loss of confidence from investors and business partners, potentially complicating the financing of future projects.

Perspectives and Challenges

Despite these challenges, Equinor, Aker BP and Vår Energi continue their investments, betting on additional discoveries and a gradual ramp-up of existing infrastructures. However, pressure from environmental groups and uncertainties related to rising costs increase the risks, particularly for projects like Yggdrasil that may be delayed if legal appeals are successful. These developments reflect the growing difficulty of conducting offshore extraction projects in increasingly hostile regions, where infrastructure costs and delays can quickly erode expected profitability.

The Algerian national company has restarted a key liquefaction unit in Skikda, strengthening its export capacity amid massive investment in the gas sector.
Doha and Washington warn Brussels about the consequences of EU sustainability requirements on liquefied natural gas exports, as the continent’s energy security remains under pressure.
The Volans-1X exploration well revealed a 26-metre productive zone in the Orange Basin, marking another hydrocarbon find for Azule Energy partners in 2025.
Faced with the absence of commercially viable results on the Guercif permit, Predator Oil & Gas has initiated a sale process while continuing technical evaluation of the gas potential.
According to the Oxford Institute for Energy Studies, a stable gas price of $6/MMBtu would boost global demand by 60 billion m³ in the short term and 120 billion m³ by 2035, mainly driven by Asia.
Kazakhstan’s Karachaganak gas field has reduced output by nearly one-third following an incident at a key Russian gas processing plant targeted by a Ukrainian drone strike.
Kinetiko Energy reports production levels above economic thresholds at two Mpumalanga wells, strengthening the technical viability and development potential of its liquefied natural gas project.
National Fuel Gas Company acquires CenterPoint Energy’s natural gas distribution business in Ohio, doubling the size of its regulated portfolio and expanding its footprint in the US Midwest.
The United States, Canada and Mexico together plan a 151% increase in liquefied natural gas export capacity, representing more than half of expected global additions by 2029.
European Union member states have approved the principle of a full ban on Russian natural gas imports, set to take effect by the end of 2027.
CMA CGM becomes the first international container shipping company to commission LNG-powered ships from an Indian shipyard, all to be registered under the Indian flag.
KLN strengthens its industrial project portfolio with progress on the WHPA platform in Libya, a major offshore site valued at over HK$10bn ($1.28bn), aimed at supporting regional gas supply.
US LNG producer Venture Global will report its Q3 2025 financial results before markets open, followed by a conference call for investors.
NextDecade confirmed a final investment decision for Train 5 at Rio Grande LNG, backed by full $6.7bn funding, marking its second decision in a month.
Sudan seeks partnership with Belarus to rehabilitate its energy grid amid prolonged humanitarian, economic and logistical crisis.
The Malaysian group launched three tenders to sell up to five liquefied natural gas cargoes in November and December, sourced from its Bintulu and PFLNG Dua facilities.
The South African government ends a thirteen-year freeze on shale gas, paving the way for renewed exploration in the Karoo Basin amid a national energy crisis.
Platts' physical pricing platform records its second-highest LNG trading volume, with nearly 1.5 million tonnes exchanged despite regional demand slowdown.
Former German Chancellor Gerhard Schröder supported the Nord Stream 2 pipeline before an inquiry, dismissing criticism over his role and Russian funding linked to the project.
Daily winter demand spikes are pushing Britain’s gas system to rely more on liquefied natural gas and fast-cycle storage, as domestic production and Norwegian imports reach seasonal plateaus with no room for short-term increases.

All the latest energy news, all the time

Annual subscription

8.25€/month*

*billed annually at 99€/year for the first year then 149,00€/year ​

Unlimited access - Archives included - Pro invoice

Monthly subscription

Unlimited access • Archives included

5.2€/month*
then 14.90€ per month thereafter

*Prices shown are exclusive of VAT, which may vary according to your location or professional status.

Since 2021: 30,000 articles - +150 analyses/week.