Norway is expected to be Europe’s key offshore oil and gas destination in the near future, with a series of fresh development projects over the next two years driving up the drilling expenditure, according to new research from business intelligence provider GBI Research.
According to the company’s latest report, “Offshore Drilling Industry in Europe to 2016 – Norway a Driving Force for the European Offshore Drilling Industry, Reserves and Development Projects,” offshore drilling expenditure will increase steadily at an Average Annual Growth Rate (AAGR) of 6.9%, from approximately $10 billion in 2012 to $12.8 billion in 2016.
Norway will be the primary contributor to this increase, achieving an estimated expenditure of $5 billion in 2016, followed by the UK with $4 billion.
Combined, Norway and the UK consistently represent around 75% of the total offshore drilling expenditure in the European region. These countries also have the highest number of wells drilled annually, followed by Denmark and the Netherlands.
Despite such activity contributing to European offshore drilling industry expenditure, there are still a number of key challenges facing future projects, such as the expected approval of the European Union’s offshore regulations, which are anticipated to lay out much more stringent rules.
Additionally, compared with land-based installations, offshore hydrocarbon exploration involves working in harsher environments and dealing with more operational challenges associated with E&P activity, adding to the complexity of the work.
However, with the Norwegian Petroleum Directorate estimating much larger quantities of undiscovered oil in the Norwegian shelf than was previously anticipated, Norway still has strong potential for offshore drilling investments over the next two to three years.