In Oil & Companies News 15/01/2016
The Norwegian Petroleum Directorate highlighted huge challenges facing the oil and gas industry in its annual forecasts Thursday, predicting total capital expenditure on the shelf would fall another 10% in 2016 to NOK135 billion ($15.3 billion) as oil output contracted.
That downward adjustment followed the 17% plunge in total spend last year to NOK150 billion ($16.98 billion) from record investment levels in 2013 and 2014 of around NOK180 billion.
The Stavanger-based directorate said more falls were to come, with spending declining in the next few years towards NOK120 billion.
The NPD said oil output was also expected to fall in 2016 to 89 million cu m (1.53 million b/d), despite an upward blip last year thanks to new fields such as Lundin Petroleum’s Edvard Grieg.
In 2015 Norway’s oil production rose to 90.8 million cu m of oil (1.57 million b/d) from 80 fields, compared to 87.7 million cu m (1.51 million b/d) from 77 fields in the previous year.
But the NPD predicted output would fall to 87.3 million cu m in 2017 and further again to just 80.2 million cu m in 2019, when the massive Johan Sverdrup oil field, one of the biggest discoveries ever made offshore Norway, is seen starting production late in the year.
“Production is expected to remain at a relatively stable level over the next few years, but will decline somewhat more than predicted in the previous prognosis,” the NPD said.
“The uncertainty is particularly contingent on the ability of the reservoirs to deliver, drilling of new development wells, start-up of new fields and the regularity of the operational fields.”
GAS OUTLOOK
The NPD’s outlook was more upbeat for gas, with production in 2016 at 106.6 billion cu m, rising to 107.3 billion cu m the following year, and further increasing to 111.1 billion cu m in 2020.
The NPD said the level of gas sales was hard to predict, even in the short term.
In 2015, the NPD said 117.2 billion cu m of gas was sold. This is 8 billion cu m more than in 2014, boosted by factors such as significantly higher gas demand from Europe.
Norwegian leading producer Statoil has said it deliberately withheld gas production in 2014 and market observers said the company ramped up production last year from swing producers like the massive Troll field, as market expectations changed.
REDUCED INVESTMENT
At a time when many of the dominant producers led by Norwegian state company Statoil have cut jobs and cancelled projects in response to the plunging oil price, NPD Director General Bente Nyland warned resources would be left in the ground.
“We see a tendency for companies to prioritise short-term earnings rather than long-term value creation,” said Nyland.
The NPD said declining oil prices created considerable uncertainty related to future investment.
“If this presumption proves wrong, and oil prices remain at the current level for a longer period, this could entail further postponement of activities, resulting in even lower investments and exploration costs caution on the assumptions behind its predictions.”
