Moe commission for cost analysis

The principal reason was the big cost overruns and delays affecting the Statfjord A project. Construction work on Statfjord B had only just started, and was expected to cost some NOK 2 billion more than the A platform – even though its production capacity was 180 000 barrels per day (b/d) compared with 300 000 b/d for the latter.

A call was made by the non-socialist parties in the Storting – who were in the minority – for a broad study of the reasons behind these cost trends on the Norwegian continental shelf (NCS). The governing Labour Party was initially opposed to an investigation.

After a long discussion, however, petroleum and energy minister Bjartmar Gjerde promised to “engage independent expertise to carry out an analysis of cost developments for all the development projects on the NCS”.

As a result of the debate on the cost overruns, a commission of inquiry chaired by professor Johannes Moe from the Norwegian Institute of Technology (NTH) in Trondheim was appointed by a royal decree of 19 March 1979. Its mandate was to clarify the principal reasons for the cost increases in the various offshore developments.

Engineer Ingvald Haga and county governor Konrad B Knutsen were also appointed as members of the “management committee”, as the commission was called. NTH professor Asbjørn Rolstadås became its secretary. His specialities included project and production management.

This Moe commission analysed a number of Norwegian oil projects and compared them with developments on the UK continental shelf. Its cost analysis identified overruns, but the subsequent debate was affected by the good oil prices.

Production rates from the newly operational Statfjord A platform were high, and so was its revenue stream. The debate on the report was also overshadowed by the Alexander L Kielland disaster in March 1980. The Moe commission submitted its report in April 1980, but the Storting did not discuss it until 14 October 1982.

A key finding of the cost analysis was that haste in the projects had boosted spending. “An important reason for large costs increases on the NCS is that development projects have been to some extent driven forward at an irrational pace,” the report concluded.

“How much money has been lost by [this] is difficult to determine. It might be sufficient to recall that haste in the start-up phase was an important reason for at least a year’s extension in construction time and billions of kroner in added costs for Statfjord A.”

Sources
Lavik, Håkon. “Statfjordsaken”. Norwegian Petroleum Museum Yearbook 1999.
Moe, Johannes et al. Kostnadsanalysen norsk kontinentalsokkel. Part 1. Summary of developments, assessments and conclusions. Part 2 Development projects on the Norwegian continental shelf. Report submitted 29 April 1980. Oslo.
Moe, Johannes. På tidens skanser, Trondheim 1999, pp 189-191.
Stafsnes, Tor. Ilandføring av petroleum fra Statfjord: analyse av en iverksettingsprosess. Bergen 1984, pp 77-78.