ONS 2016: Costs coming down, but Norwegian operators remain cautious

Offshore staff

STAVANGER, Norway – Development costs for Norwegian fields have decreased by more than 40% since late 2014, according to the Norwegian Petroleum Directorate (NPD).

NPD’s estimate is based on analysis of eight planned developments: Utgard, Oda, Zidane, Trestakk, Snilehorn, Johan Castberg, Snorre Expansion, and Johan Sverdrup Phase 2 projects. Investment estimates have cumulatively down from about NOK 270 to 150 billion ($32.6 to 18.1 billion), according to the operators’ own calculations.

The biggest savings have come from altered development solutions followed by drilling and wells, which typically account for around 30% of overall field development costs. This is due to lower rig rates and more efficient planning that is allowing companies to drill their wells faster.

Drilling operations, meanwhile, have become more efficient, with a lower price per meter of well drilled.

Expenditure on pipelines and offshore cables is also set to fall substantially, helped by lower prices for materials, and operators choosing different routes.

Simplified development solutions and lower-cost materials should in turn lead to more reasonably priced modifications and adaptations of facilities receiving production from new developments.

However, NPD is concerned that short-termism among many oil companies could lead to problems for the sector over the years ahead.

Director of development and operations, Ingrid Sølvberg said the outlook depends on oil price movements and the willingness of companies to invest. Unfortunately, many companies at present are reluctant to commit to what they see as risky investments.

“The industry needs to maintain a long-term perspective,” she said. The Norwegian authorities are getting together with oil companies to find solutions, she added, with one of their priorities being to address stagnation in exploration.

This year is the 50th anniversary of the first exploratory activity on the Norwegian shelf. Sølvberg pointed out that under the development plans for 26 of Norway’s older producing fields only five should still be in production today, whereas the actual figure is 24.

Collectively, these fields were expected to have produced 2 bcm of oil and gas by now, but the actual total has been 3.74 bcm.

NPD estimates 5 Bbbl of Norway’s remaining hydrocarbon resources can be extracted through improved recovery processes, she added.

Most of Norway’s new developments involve fields with 60 MMbbl or under, she said, and most will be subsea tiebacks, taking advantage of initiatives to open up infrastructure in overlapping licenses.

This year the NPD has received two submissions for PDOs (plan of development and operation), both from Statoil for the Utgard and Byrding projects. Two to three more may follow later this year, she said.

08/29/2016

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