The audit revealed weaknesses in the plans and the documentation on which the projects Åsgard, Visund and Jotun were based. The Office of the Auditor General is of the opinion that the authorities have the opportunity to influence the field development projects, in particular in connection with their approval of the plans. In the Office of the Auditor General’s opinion, the Ministry of Petroleum and Energy is responsible for ensuring that all the significant factors in the field development projects have been fully analysed and assessed and that the central presumptions in the cost calculations are reasonable and realistic.
There were cost overruns in 30 out of a total of 32 field development projects that were carried out in the 1990s. The Office of the Auditor General investigated the considerable overruns incurred by the Åsgard project, which is the largest oilfield development ever carried out on the Norwegian continental shelf. The audit also included the Visund and Jotun projects.
The audit revealed that the authorities’ main opportunity to influence the field development projects is during the planning phase of the projects and in connection with approving the plans for development and operation of fields (PDO). Thus it is reasonable to expect that the authorities focus their attention on the content of the plans in order to ensure that they are able to influence the projects. In the Office of the Auditor General’s opinion, the authorities are responsible for ensuring that all the significant factors related to the field development projects are fully analysed and assessed and that the central presumptions in the cost calculations are reasonable and realistic.
The plans did not contain a comprehensive explanation of how the licensees reached their estimated costs. Overall estimates of costs were presented, and although unit rates were quoted for some elements, this was not sufficient to allow the estimates to be verified. The Office of the Auditor General holds that the submitted plans should contain costs estimates that can be checked and verified.
The Ministry of Petroleum and Energy stresses that the authorities and the developers of the fields have different roles, and that the oil companies and engineering companies are expected to possess the expertise necessary to assess the costs. The Office of the Auditor General has not been able to establish what responsibility the authorities actually assume in connection with their assessment of the costs estimates in the planning process and their approval of the plans for development and operation of oilfields.
The Ministry of Petroleum and Energy do agree with the auditors that there were weaknesses in the sensitivity analyses. In the future, the Ministry is going to pay more attention to the factors related to the processing of cases discussed by the Office of the Auditor General.
The audit report can be downloaded from the Office of the Auditor General’s website – www.riksrevisjonen.no – or ordered from the University bookshop Akademika, tel. +47 22 11 67 70. The Report will be closed on Friday 6 April 2001, at 10 AM.