Sharp drop expected in Norway offshore investments
High costs and lower oil prices could drive necessary readjustments that will strengthen Norway’s petroleum industry, according to the Norwegian Petroleum Directorate (NPD).
OSLO, Norway – High costs and lower oil prices could drive necessary readjustments that will strengthen Norway’s petroleum industry, according to the Norwegian Petroleum Directorate (NPD).
“The drop in prices could lead the industry to implement significant cost cuts,” said director general Bente Nyland. “This is needed, although over the short term this could translate into a lower activity level.”
Despite the current uncertainty, the Norwegian shelf is well-equipped to address the changing situation, she claimed.
NPD’s latest annual review shows that activity offshore Norway remains high, with four new fields coming onstream in 2014. The number of exploration well spuds was the third highest ever – 56 – and 22 new discoveries resulted, two more than in 2013. Of these, eight were in the North Sea, five in the Norwegian Sea, and nine in the Barents Sea. Collectively they contain 40-110 MMcm of oil/condensate and 25-75 bcm of recoverable gas.
Last year, Norway’s oil production increased for the first time since 2000, reaching 87.8 MMcm, 3% above the figure for 2013.
“New wells have produced more than expected,” Nyland explained, “and this is the most important reason behind the production growth. The fields’ regularity has also improved, and many good measures have been implemented. For example, the increased drilling on Snorre [in the North Sea] shows the importance of continuous drilling on mature fields.”
NPD’s preliminary figures suggest a total investment of NOK 172 billion ($22.26 billion) in petroleum activities on the Norwegian shelf last year. This year, however, the association forecasts that spending will dip by around 15%, followed by a further 8% decline to 2017, before recovering slightly in 2018.
Last year the Norwegian authorities received only one plan for development and operation forStatoil’s 34/10-53 S gas discovery near Gullfaks Rimfaksdalen in the North Sea.
However, 11 fields were under development at the end of the year, comprising nine in the North Sea, one in the Norwegian Sea, and one in the Barents Sea. This is a record for Norway.
“There are currently 79 producing fields on the Norwegian shelf,” Nyland added. “These are profitable fields where both the state and the companies are making money, and this is how it will stay, evenif the oil price should drop further.”
NPD calculates that 55% of the country’s oil and gas resources are yet to be produced, and should provide the basis for high activity level for many years.