StatoilHydro has admitted after a spending analysis that its Snoehvit project in northern Norway, Europe’s only export terminal for liquefied natural gas, will be over its original budget by nearly double to 74.4 billion kroner ($11.46 billion).

The company was criticized heavily in national newspapers by none other than government’s own energy budget overseers, although field partners Gaz de France, Total and state entity Petoro also weighed in with criticism.

StatoilHydro on Wednesday said the future development of Snøhvit for the period to 2032, Phase 2 to Phase 4, could cost 20.8 billion kroner ($3.2 billion), higher than an estimated given three years ago, when supplier costs were less.

“Catastrophe”, said one field partner, while others expressed some disappointment in Norwegian newspapers.

StatoilHydro boss Helge Lund has been under intense criticism for breaking budgets, although project planning extends back beyond his tenure as chief executive. Surprises which have irked Norwegians were the appearance of two large flares and the ensuing soot and carbon dioxide build-up.

An unforeseen problem arose in the key heat-exchanger housing for liquefying natural gas. The oil company has no choice but to summon suppliers and to ask for large or small solutions from a range of international companies.

StatoilHydro’s spokespeople long ago told Scandoil.com that plant shut-downs would be common, as solutions are tried ahead of getting production up above the current 80 percent of capacity, after which the larger of two flares might be put out of service for burning unused wells stream.

License partners, meanwhile, have seen their deep-pocketed partner oversee some dry wells in the Arctic waters around Snoehvit. In fairness, Norwegian officialdom has pressured partners to drill wells nearer potential partners to help spread risk, as with drilling aimed at finding a link between Snoehvit and Eni Norge’s Goliat reservoir.

StatoilHydro revealed Wednesday that current work to overcome the problems of pioneering an arctic LNG project were in fact a separate project costing up to 5.5 billion kroner “depending on the solution”. A final project decision will not be taken until some time in 2009.

“During start-up of Snoehvit there have been challenges concerning regularity and capacity,” a company statement said, adding, “Further experience” running the plant on trial solutions are still needed.

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.

This month, seawater coolers and “measures to limit the emission of nitrogen oxide and carbon dioxide” will be screened.

“Snøhvit is still a highly profitable and attractive,” the company said.

Partners in Snøhvit are operator StatoilHydro (33.53 percent), Petoro (30 percent), Total (18.4 percent), Gaz de France (12 percent), Hess (3.26 percent) and RWE Dea (2.81 percent).

Tags: Snohvit field, StatoilHydro