StatoilHydro Increases Development Costs for Snohvit Project

StatoilHydro ASA

StatoilHydro has presented a revised investment estimate for the Snohvit project as part of the Norwegian authorities' annual updating of projects under development.

The overall plan for development and operation (PDO) and the plan for installation and operation (PIO) of Snohvit were approved by the Norwegian Storting (parliament) in March 2002. The Snohvit project was divided into four phases, of which phase 1 -- the development and start-up phase -- was described in detail in the plan for development and operation.

Snohvit is the first LNG project in Norway and has been a pioneering and technologically innovative project. The plant came on stream in September 2007 as the first field development in the Barents Sea.

The final development costs for phase 1 of Snohvit are NOK 48.1 billion in nominal terms, an increase of NOK 3 billion compared to the estimate of September 2005. The increase is in its entirety related to the completion of the onshore plant.

During start-up of Snohvit there have been challenges concerning regularity and capacity. In order to reach the planned capacity of the plant and to ensure stable and safe operations, a separate project has been established to further evaluate the most appropriate measures for this purpose.

A final decision on this matter will be taken in 2009, based on further experiences gained from the plant. The Company has informed the partners that the costs of this project are expected to be in the range of NOK 2.5-5.5 billion, depending on the solution chosen.

Since the scheduled shutdown this summer Snohvit has maintained stable production at around 80% of planned capacity. 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 (NOx) and carbon dioxide (CO2).

StatoilHydro has also presented an updated investment estimate regarding the future development of Snohvit for the period 2015 to 2032. The overall investment estimate for phases 2-4 is NOK 20.8 billion, which is NOK 7.5 billion higher than the estimate of September 2005.

The increase is in its entirety due to the cost development related to for example drilling rigs and other material. 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.

The partners in Snohvit are:

  • StatoilHydro (Operator) (33.53%)
  • Petoro (30), Total (18.4%)
  • Gaz de France (12%)
  • Hess (3.26%)
  • RWE Dea (2.81%)