OSLO, Norway – Low oil prices have caused problems for Norway’s petroleum industry, but the sector still holds significant remaining resources.
These, the Norwegian Petroleum Directorate (NPD), combined with cost reductions and efficiency improvements, can help sustain high activity and future profitability from Norwegian offshore E&P over the years ahead.
In its review of the sector in 2015, NPD points out that various new wells allied to good regularity on certain fields helped deliver an increase in the country’s oil production for the second consecutive year.
A new gas sales record was established due to higher demand from mainland Europe.
Despite the drop in revenues, the oil and gas industry remains Norway’s largest, with values of export exceeding NOK 400 billion ($45.4 billion), according to director general Bente Nyland.
Recent efficiency measures were starting to pay off in the form of lower costs, she added.
A record number of wells were drilled across the Norwegian shelf last year, including 56 exploration well spuds, comprising 41 wildcats and 15 appraisal wells, with overall exploration costs estimated at NOK 33 billion ($3.75 billion).
The main reason for the increase was the drilling of side tracks, which are cheaper than “initial” exploration wells.
Exploration and appraisal drilling led to 11 discoveries in the North Sea and six in the Norwegian Sea, although most were relatively small.
This year, NPD expects a decline to around 30 exploration well spuds with total exploration costs of NOK 22 billion ($2.5 billion), followed by a gradual increase in spending after 2017.
While 30 wells is a much lower total than in recent years, it is still substantial in a historical perspective, the association claims.
Resources added by the 17 new finds total around 8-20 MMcm of oil and 14-40 bcm of recoverable gas/condensate.
The two most active drillers in 2015 were Statoil and Lundin, which respectively spudded 14 and 13 exploration wells, followed by Wintershall and Det norske oljeselskap (five each), VNG and Suncor (three each), and Maersk and BG (two each).
Following record investments in 2013 and 2014, spending on drilling was down by 16% on the previous year at just under NOK 150 billion ($17 billion). The decline is set to continue for a while, followed by a moderate increase from 2019.
Over the next few years NPD estimates total costs of wells to be more than NOK 200 billion ($22.7 billion) annually.
Last year the country’s authorities approved four plans for development and operation (PDOs), compared with one in 2014. This quartet has led to an increase in the reserves estimate across the Norwegian shelf.
Currently six Norwegian fields are under development in the North Sea, two in the Norwegian Sea and one in the Barents Sea. NPD expects to receive development plans for three new fields this year.
Over half the resources on the shelf have yet to be produced, and Nyland fears sustained lower oil prices could prevent implementation of necessary measures.
“We see a tendency for the companies to prioritize short-term earnings rather than long-term value creation,” she said.
Eighty-two Norwegian fields were producing at the end of 2015. NPD expects overall operating costs to fall over the next few years following newly implemented efficiency measures and reduced well maintenance.
This year NPD expects Det norske’s Ivar Aasen and Maersk’s Flyndre in the North Sea to come onstream, along with the imminent start-up of Eni’s Goliat oil field in the Barents Sea, using the first Sevan cylindrical FPSO on the Norwegian shelf.