STAVANGER, Norway—Costs for eight projects under development on the Norwegian Continental Shelf (NCS) have been reduced by an average of more than 40% over the last two years, according to the Norwegian Petroleum Directorate (NPD).

The estimates—based on figures from the operating companies—for the Utgard, Oda, Zidane, Trestakk, Snilehorn, Johan Castberg, Snorre Expansion and Johan Sverdrup Phase 2 projects have fallen from about NOK 270 billion (US $32.5 billion) to NOK 150 billion ($18 billion), the NPD said.

The downward trend is a result of:

  • Altered and consequently simpler development concepts;
  • More efficient drilling and wells (around 30% of the overall development costs) due to lower rig rates and better planning; and
  • Lower prices for work and equipment.

Investments in pipelines and cables are also expected to decline significantly as a result of falling prices for materials and choosing different routes.

Ingrid Sølvberg, director of development and operations for the NPD, described the finding as “a significant and very welcome reduction.”

But Sølvberg warned against short-term savings at the expense of long-term value creation on the NCS, including a warning against cutting staff in “important technical environments.” Such moves could impair the capacity for innovation and the ability to find smart solutions.

The NPD also flagged up areas where companies tend to prioritize minimizing investment in development phases, but could result in limiting subsequent upgrades of facilities or making them more expensive.

“We must not put ourselves in a situation where cost cuts reduce the future flexibility on the fields or have a detrimental impact on our ability and willingness to use technology that can provide better and more efficient resource management,” Sølvberg said.

Offshore