4.3.5Expenses by Nature
The table below sets out expenses by nature for all items included in EBIT for the years 2023 and 2022:
Note | 2023 | 2022 | |
|---|---|---|---|
Expenses on construction contracts | (2,130) | (2,367) | |
Employee benefit expenses | (842) | (740) | |
Vessels operating costs | (512) | (412) | |
Depreciation, amortization and impairment | (94) | (189) | |
Selling expenses | (10) | (4) | |
Other costs | (232) | (218) | |
Total expenses | (3,820) | (3,930) |
In 2023 ’Expenses on construction contracts’ slightly decreased compared to the previous year. Despite having five FPSO’s under construction during the period and the start of FPSO FEED work for the Whiptail development project (compared to five FPSO’s in 2022), the reduction is a result of lower progress on Turnkey Brazilian projects and the completion of FPSO Prosperity partially offset by the higher progress of FPSO ONE GUYANA and newly awarded FPSO FEED work for the Whiptail development project.
’Employee benefit expenses’ increased due to higher man-hour-related activities in Turnkey projects and the ramp-up of operations on the fleet in operation.
’Vessel operating costs’ increased, mainly as a result of a higher scope of work in several vessels and the operational start of FPSO Prosperity during the last quarter of 2023, which was partially offset by the impact of FPSO Capixaba leaving the fleet. FPSO Liza Unity, despite the sale of the unit during 2023, continues to be operated by the Company through the OMEA signed with the client in 2023.
The decrease of ’Depreciation, amortization and impairment’ mainly relates to the prior year impairment of US$92 million on FPSO Cidade de Anchieta due to the additional costs required for tank repairs, following the shutdown in 2022 and the capitalization of associated tank repair costs, and FPSO Capixaba, which finished production in 2022.
Expenses related to short-term leases and leases of low-value assets amounted to US$6 million (2022: US$1 million).
The increase of ’Other costs’ is mainly driven by the overall ramp-up of digital activities, with impact on consultancy and software fees, business travel costs and currency exchange differences.