Norway faces run-up before long-term decline, report warns
The global financial crisis has not hit activity offshore Norway as much as expected, according to the Norwegian Oil Industry Association’s (OLF) 2010 business trend report.
OSLO, Norway -- The global financial crisis has not hit activity offshore Norway as much as expected, according to the Norwegian Oil Industry Association’s (OLF) 2010 business trend report.
However, the industry in Norway still faces big challenges, according to managing director Gro Brækken. “We need political answers if value creation by the petroleum sector is to remain a cornerstone of the growth in Norwegian prosperity.
“The oil-policy traffic lights have been at amber for long enough. Clear political decisions about the future for the NCS [Norwegian continental shelf] are now needed by the industry.”
OLF’s latest analysis of investment prospects for the NCS is brighter than in the 2009 report. It now expects annual capex by the petroleum sector to rise from the current level of NOK 142 billion ($24 billion) to NOK 157 billion ($26.6 billion) in fixed prices by 2014.
Thereafter, a decline may set in.
“Plans now exist for developing virtually all the discoveries of significance on the NCS during the present decade,” said Brækken. “If finds continue to be small, the industry – including an increasingly extensive supplies sector – will experience a large-scale contraction towards the end of the decade.”
OLF says oil production on the shelf is now waning, and within a few years will have halved from the peak achieved around 2000. And the expansion in gas output over the past decade also shows signs of leveling. As a result, overall production is falling faster than Norway’s government anticipated.
“The industry has responded to this decline with a record level of exploration, and we’re constantly making new discoveries,” Brækken said. “But these are generally small because exploration acreage has not been enlarged since the mid-1990s. Securing new areas to explore is therefore crucial.
“The long-term directions in Norway’s petroleum policy have been based on a commitment to producing all profitable resources on the NCS,” she added. “A new petroleum White Paper is due in 2011 – well behind schedule after a gap of seven years from the previous policy document.
“The political signals it provides will be closely observed by the whole petroleum industry. We need politicians who can lay the basis for further development, not decay.”
The report identified 72 exploration wells offshore Norway in 2009, resulting in 28 discoveries. This year the final figure will likely be nearer to 50 wells.
OLF adds that Norway’s remaining reserves still are substantial. Total recoverable resources at Dec. 31, 2009, were estimated at 84 Bboe, of which 33 Bboe had been produced.
Total remaining recoverable resources are estimated at 51 Bboe, with an uncertainty range of 33-73 Bboe. This is due to limited knowledge of the resource base in large parts of the Barents and Norwegian seas.
However, resolution of the Barents Sea boundary between Norway and Russia opens opportunities for discovering fresh resources. Speedy surveying of these resources on the Norwegian side of the boundary will be important, OLF adds.