Billionaire Kjell Inge Roekke, who controls half of Det Norske Oljeselskap ASA (DETNOR), warned cost overruns and production delays may limit the company’s ability to fund the development of Norway’s biggest oil find in decades.
“Late start-up of oil production at the Ivar Aasen field may have significant consequences for the funding of the Johan Sverdrup development,” Roekke said in a letter to Aker ASA (AKER) shareholders today. “I’m convinced that the development of Ivar Aasen will be more expensive than budgeted, and that production of first oil will occur later than planned. I probably should keep quiet, but I can’t.”
Contracts for the Ivar Aasen field have been awarded to companies including Italy’s Saipem SpA (SPM) and Singapore’s SMOE, a unit of Sembcorp Marine Ltd. (SMM) Roekke’s Aker, which owns 49.99 percent of Det Norske, fears the contractors don’t have the experience necessary to build a platform for use offshore Norway, the billionaire said.
“My greatest concern is that the topside for the Ivar Aasen platform is to be built in the Far East,” he said in a letter published in Aker’s annual report today. “That is well outside my comfort zone.”
Roekke, whose company had already “strongly advised” Det Norske to choose contractors with suitable experience, would have preferred that the deals were awarded to Norway’s Kvaerner ASA (KVAER) and Aker Solutions ASA (AKSO), in which Aker holds stakes, he said.
Det Norske’s biggest owner is “allowed to speak freely,” spokesman Torgeir Anda said by mobile phone, declining to comment further.
Det Norske, based in Trondheim, has said the development of Ivar Aasen may cost about 24.7 billion kroner ($4.2 billion). The field, which is estimated to hold 150 million barrels of oil equivalent, is scheduled to start production in the fourth quarter of 2016.
Statoil ASA (STL), Norway’s largest energy company, has a 50 percent stake in Ivar Aasen, while Det Norske has 35 percent and Bayerngas Norge AS 15 percent.
Det Norske also holds stakes in two of the three licenses containing the Johan Sverdrup discovery, which could hold as much as 3.6 billion barrels of oil and be the biggest find off Norway since 1974.
“I view Det Norske as a major value generator and a potential future dividend machine for Aker, but the company must avoid getting lost along the way,” said Roekke.
To contact the reporter on this story: Mikael Holter in Oslo at firstname.lastname@example.org
To contact the editor responsible for this story: Christian Wienberg at email@example.com