Norwegian Petroleum Directorate has today issued a statement saying that high costs and weaker oil prices could drive necessary readjustments that will strengthen the petroleum industry over the long-term.
Significant remaining resources on the Norwegian shelf provide a basis for continued value creation and a high activity level for many years to come, the NPD said.
"The drop in prices could lead the industry to implement significant cost cuts. This is needed, although over the short-term this could translate into a lower activity level," says Director General Bente Nyland.
"A cost reduction now could lay the foundation for ensuring robust profitability over time."
According to Nyland, the Norwegian shelf is well-equipped to face and tackle the changes that are happening, in spite of the significant uncertainty in the petroleum industry.
Activity is high, and four new fields came on stream in 2014. The number of spudded exploration wells was the third highest ever recorded. 56 exploration wells were spudded, and 22 new discoveries were made – two more than the year before. Eight of these were in the North Sea, five in the Norwegian Sea and nine in the Barents Sea.
The resources in these new discoveries amount to between 40-110 million standard cubic meters (Sm3) of oil/condensate and 25-75 billion Sm3 of recoverable gas.
The total production of oil and gas peaked at 216.7 million saleable Sm3 oil equivalents (o.e.). This is 47.4 million Sm³ o.e. less than in the record-setting year 2004, and 1.4 per cent more than in 2013.
Oil production increased in 2014 for the first time since the year 2000. It reached 87.8 million Sm³, which is three per cent higher than the year before.
"New wells have produced more than expected, and this is the most important reason behind the production growth," says Nyland.
"The fields' regularity has also improved, and many good measures have been implemented. For example, the increased drilling on Snorre shows the importance of continuous drilling on mature fields."
Only one PDO
According to the Norwegian Petroleum Directorate's preliminary figures, NOK 172 billion was invested in the petroleum activities on the Norwegian shelf last year. Investments are projected to drop around 15 per cent from 2014 to 2015 and by an additional eight per cent to 2017, and will then plateau with a moderate increase from 2018.
The authorities received only one Plan for Development and Operation (PDO), which was for the 34/10-53 S gas discovery near Gullfaks Rimfaksdalen in the North Sea. However, eleven fields were under development at the end of last year: nine in the North Sea, one in the Norwegian Sea and one in the Barents Sea. This is a record-high number and will result in considerable investments over the next few years.
"There are currently 79 producing fields on the Norwegian shelf. These are profitable fields where both the State and the companies are making money, and this is how it will stay, even if the oil price should drop further," says Bente Nyland.
"55 per cent of Norway's total oil and gas resources remain in place, waiting to be produced. These remaining resources provide a basis for continued significant value creation and high activity level for many years to come," she points out.