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Cost of oil, gas projects in Norway rise amid COVID-19 pandemic

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The COVID-19 pandemic has interrupted the development of a number of offshore oil and gas projects in Norway and pushed their costs up, the government and operator Equinor said on Wednesday.

Equinor’s Martin Linge oil and gas field is now expected to cost 60.8 billion Norwegian crowns ($6.52 billion), up from an estimate of 56.1 billion crowns a year ago, the government’s 2021 fiscal budget showed.

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

Cost overruns also hit the Njord Future and other developments.

Norway plans to rein in spending from its $1.1 trillion sovereign wealth fund next year as the economy rebounds from the COVID-19 pandemic, the centre-right minority coalition told parliament on Wednesday.

The government proposed withdrawing 313.4 billion Norwegian crowns ($33.56 billion) from the wealth fund in what will be an election-year budget, down from 404.3 billion crowns in 2020.

The so-called structural non-oil deficit corresponds to 3.0% of the fund’s expected value at year-end, the Finance Ministry said, exactly in line with parliament’s cap on spending.

The projected spending for 2020 corresponded to 3.9% of the fund’s value however, taking advantage of a rule allowing extra spending in times of economic hardship, but was still lower than the 4.2% projected in May.

Mainland gross domestic product, also known as non-oil GDP, is now expected to contract by 3.1% in 2020, less severe than the 4.0% drop seen in May, and next year will see a 4.4% rebound, the government predicted.

Conservative Prime Minister Erna Solberg must seek backing for the budget from the rightwing Progress Party however, a previous partner which left the government in January in a dispute over immigration and security.

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