Cost of BP's Skarv Could Spiral by 10 Billion NOK

Costs at the BP-operated Skarv field in Norway could spiral by up to 10 billion kroner (approximately €1.37 billion), a Norwegian weekly magazine has reported.

According to Teknisk Ukeblad, BP is facing rising costs at the gas-rich field due to a mixture of equipment issues and an increasingly pressured marketplace for engineering firms. Speaking to the magazine, Geir Edvardsen, Skarv Transport and Installation Manager for BP, said that engineering firms already working to full capacity was a prime result of the delay.

"In addition to the difficulty in getting hold of vessels and rigs, there is tremendous pressure on engineering services," he said. "The vendors say they do not have the capacity to take on more assignments."

The rise in costs comes after earlier delays on the Skarv field, which was originally expected to be in operation in 2011. However, issues with a floating production and storage unit (FPSO), provided by Samsung Heavy Industries Co., and leaks in pipelines, took several months to repair. As a result, the Skarv field is expected to be operational by the fourth quarter of this year.

In his interview with Teknisk Ukeblad released today, Mr. Edvardsen said that the project was now moving according to plan with equipment so far functional.

"We are on schedule to start in the fourth quarter of this year," he said. "Most of the installation work is completed and testing of subsea pipeline in the field looks good; no leaks have been found."

BP is the operator of the Skarv field with a 23.835 per cent stake. Norwegian major Statoil holds a 36.165 per cent stake. E.ON holds a 28.0825 per cent stake share with PGNiG holding a 11.9175 per cent stake.