Norway Reconsiders Cancellation of First Ship Tunnel After Soaring Costs

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Norway’s ambitious plan to build the world’s first tunnel for ships under the Stad peninsula has taken a surprising turn. Earlier this month, the government announced the project’s cancellation after construction bids nearly doubled the budget.

However, following pressure from the parliament, the plan has been revived for renewed cost negotiations.

The Stad Ship Tunnel, long envisioned as a safe passage through one of Norway’s most treacherous coastlines, was halted after estimated costs surged to over 9.4 billion NOK (around $1 billion USD).

The government said the soaring expenses made the project economically unfeasible, especially as several shipping companies, including Hurtigruten, had expressed reluctance to use the route.

But during the Speech from the Throne debate on October 14, the Storting (Norwegian parliament) instructed the government to continue discussions with contractors to determine a final price and explore cost-cutting options.

As a result, the Ministry of Trade, Industry and Fisheries (NFD) instructed the Norwegian Coastal Administration (Kystverket) to resume the tender process.

Coastal Director Einar Vik Arset said the administration is now entering negotiations with three shortlisted contractors-AF Group, French company Eiffage Génie Civil, and Skanska, in partnership with Vassbakk and Stol.

According to Arset, the revised initial offers are expected by late November, with further negotiations planned through early 2026. He noted that the objective is to identify smarter solutions, minimise risk and lower the overall project cost.

The administration plans to submit a comprehensive basis for assessment to the ministry by March 2026, enabling its inclusion in the revised national budget. This submission will include updated cost frameworks, referred to as P50 and P85 projections, as well as options for reducing expenditure.

The new progress schedule sets key milestones: revised offers by November 27, 2025, negotiations in December, new offers in January and February, and possible final rounds in March–April 2026.

Meanwhile, preparatory work continues on analyses and administrative processes essential for keeping the project on track. These efforts, according to Arset, are being managed carefully to avoid major financial commitments before a final decision is made.

The Coastal Administration has also updated its socio-economic assessment of the project. The revised study shows a net benefit per krone (NNB) of –0.95, indicating limited economic returns compared to previous estimates.

However, it also highlights some increased benefits, such as savings in shipping delays and the potential reuse of excavated rock for new business development rather than seabed dumping.

The Stad Ship Tunnel, first imagined in the 19th century, was conceived to provide a safe maritime passage through one of Norway’s most weather-exposed regions. However, the project was placed on hold earlier in October after cost estimates rose to more than 9.4 billion NOK, nearly double the initial budget.

Reference: kystverket