Policy Change Key To Stem Decline


BMI View: The Norwegian oil and gas sector is seeing challenges from rising costs and the scaling back of investment, which could force the delay of some projects as higher margin developments are prioritised. We therefore see downside risk to the short-term oil productio n outlook . However, we expect the Norwegian government's review of fiscal policy to culminate in better terms for improved oil recovery and marginal field developments, which would support greater investment in the maturing Norwegian continental shel f, stemming the decline rate.

The Norwegian oil and gas sector is being impacted from two sides as industry costs continue to rise, while companies rein in spending and prioritise their projects. State-owned oil company Statoil will be at the centre of this development, having many of the most significant investments on the Norwegian continental shelf (NCS).

In 2013, Statoil announced its plan to invest US$6.8bn in redeveloping the Snorre oil field through drilling new wells and installing an additional production platform at the field. However, the final investment decision (FID) on this project, which was outlined for 2015, may be delayed as Statoil looks to prioritise its spending due to recently introduced capital expenditure (capex) restrictions. Following the company's full year results in February 2014, CEO Helge Lund announced an 8% reduction on capex, targeting average expenditure of US$20bn a year from 2014-2016. With Statoil's large number of domestic projects and a growing international portfolio, projects outlined for development will come under growing pressure as margins will be more closely scrutinised.

12 Years Of Decline
Norway Crude Oil, NGPL and Other Liquids Production ('000b/d)

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This article is tagged to:
Sector: Oil & Gas
Geography: Norway

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