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UPDATE 2-Pandemic pushes up cost of Norway's oil and gas projects

(Adds details, production outlook)

OSLO, Oct 7 (Reuters) - The COVID-19 pandemic has interrupted the development of Norway’s offshore oil and gas projects, pushing up costs and postponing startups, the government and oil company Equinor said on Wednesday.

The costs of ongoing projects rose by 13.2 billion Norwegian crowns ($1.4 billion) from a year ago on an inflation-adjusted basis, government documents showed, as COVID-19 restrictions stalled construction at several fields.

“The COVID-19 pandemic and weakened Norwegian (currency) have negatively impacted some of the projects, but the combined project portfolio is still very resilient,” Equinor said in a separate statement.

Following the delays, Norway’s oil output for next year is now expected to be 2.15 million barrels per day, slightly less than the 2.24 million predicted for 2021 one year ago, the government’s budget showed.

Gas production is expected to be 117 billion cubic metres (bcm), less than 121 bcm forecast a year ago.

Equinor’s Martin Linge oil and gas field is now expected to cost 60.8 billion crowns, up from an estimate of 56.1 billion a year ago, Norway’s 2021 fiscal budget showed.

The company’s Johan Castberg Arctic oilfield, meanwhile, is now expected to cost 53.4 billion crowns, up from 49 billion crowns previously, the government said.

Cost overruns also hit Equinor’s Njord Future, Repsol’s Yme and other developments.

In March, the long-delayed Martin Linge development became the first offshore field to be hit by the pandemic when installation work was halted after an employee tested positive for the virus.

Half of the inflation-adjusted cost increase of 3.6 billion crowns for Martin Linge was down to infection control measures, Equinor said.

The pandemic also interrupted construction of the Johan Castberg’s floating production, storage and offloading unit (FPSO) at a yard in Singapore, while the company also discovered technical problems.

Both projects have been delayed by about a year, with Martin Linge now expected to come on stream in the summer of 2021 and Johan Castberg in the fourth quarter of 2023.

The cost of the Njord Future project which aims to produce an extra 175 million barrels of oil equivalent from Njord and its tie-back Hyme also rose and the planned startup date has been delayed until next year.

As a result, several smaller projects, which are planning to use the Njord’s production facilities, such as Neptune Energy’s Fenja, will also be delayed. ($1 = 9.3182 Norwegian crowns) (Editing by Terje Solsvik and David Clarke)

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