OSLO-Norway's Statoil ASA [STO] said Friday that it expected to spend nearly a third less than planned to build the Polarled pipeline, which is set to bring gas from an Arctic field to the Norwegian mainland, after the pipeline-laying vessel crossed the Arctic Circle this morning.

"We are currently expecting to deliver way below budget," said Statoil project manager Alfred Øijord.

The Polarled pipeline was budgeted at 11.1 billion Norwegian kroner ($1.35 billion), but the operator Statoil now expects it to cost around NOK7.5 billion, partly due to favorable market conditions.

Lately, Statoil has been pushing suppliers to reduce costs, amid oil prices that are more than halved on the year, with Brent trading Friday at around $46 a barrel. The company has delayed several high-profile projects, notably the Arctic Johan Castberg oil field, in a bid to reduce development costs.

The 482-kilometer (300-mile) Polarled pipeline, the deepest-ever off Norway and the first to cross the Arctic Circle, will take gas from the Aasta Hansteen gas field in the Norwegian Sea to Nyhamna on the country's western coastline, for processing and exports to Europe through the country's vast ocean-bottom pipeline network.

Future discoveries in the Norwegian Sea may be attached later through six additional connection points, and Statoil said the pipeline may trigger future exploration in the area, which is less well-explored than the mature North Sea province.

"Polarled will open up for gas export to Europe from a completely new gas province, and with the infrastructure in place it will also be more attractive to explore the surrounding area," said Håkon Ivarjord, Statoil's Polarled project venture manager.

The Arctic pipeline is placed on the sea bottom by the world's largest pipeline-laying vessel, Allseas Group S.A.'s Solitaire, at a pace of around four kilometers a day. The vessel started its work at Nyhamna in March and is expected to reach its destination at Aasta Hansteen in September, if the weather remains good.

A hefty supply of pipes is required to keep the pace. As each piece of pipe is only 12.2 meters long, it takes two to three shiploads each day to supply the roughly 300 pipes that Solitaire is laying down daily, Statoil said.

The Polarled licensees also include Petoro, OMV AG, Royal Dutch Shell PLC, Total SA, RWE Dea AG, ConocoPhillips, Edison, A.P. Möller Maersk A/S, GDF Suez and Wintershall AG.

Write to Kjetil Malkenes Hovland at kjetilmalkenes.hovland@wsj.com

 

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August 21, 2015 08:13 ET (12:13 GMT)

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