Oil & Gas Norway

By Tsvetana Paraskova

Western Europe’s largest oil and gas producer, Norway, celebrates 50 years as a petroleum producer this year.

The petroleum industry is one of the pillars of Norway’s economy as oil and gas combined account for half of the value of all exports of goods.

Norwegian oil and gas production has been declining in recent months and years, but thanks to major oil discoveries made before the downturn and set for production start-up over the next few years, Norwegian oil and gas output is expected to rise until the middle of the next decade.

Now that the 2015-2016 investment and drilling downturn is over, companies operating on the Norwegian Continental Shelf (NCS) are eager to boost exploration efforts in search of new oil and gas finds to either tie-back to existing platforms in developed areas, if they are close enough, or to plan as a standalone development if they are large enough.

Norway’s petroleum authorities warn that without a major new discovery that has to be made soon, Norwegian oil production is set for a decline beginning somewhere around 2025. Until then, production this year is set for another drop, before two major oilfields come online later in 2019 and in 2022 to boost production.

Norway is also eager to tap the carbon capture and storage (CCS) and offshore wind markets to encourage greener energy developments and expand opportunities for its companies in the supply chain who have the engineering and technological expertise to deliver on such projects.

In 2018, oil and gas exploration activity offshore Norway picked up pace. Activity was considerably higher last year than in 2017 and 2016, according to government figures. A total of 53 exploration wells were spudded last year, with 12 discoveries made. The resources growth from these discoveries was higher than in each of previous three years, but it is still insufficient to keep Norway’s production at a high level after 2025, the Ministry of Petroleum and the Norwegian Petroleum Directorate (NPD) say.

Oil production in 2018 was 6 per cent lower than in 2017, as new start-ups were unable to offset natural production declines at mature fields. Gas production was high last year, but total gas sales were 2 per cent lower than in 2017, according to official figures.

A decline in the 2018/2019 oil and gas production will be followed by rising output between 2020 and 2023. In 2023, overall Norwegian oil and gas production could approach the record level from 2004, the NPD said in its overview of the industry earlier this year.

This year, exploration is expected to remain at the high level from 2018 when 53 wells were spudded.

“The activity level on the Norwegian Shelf is high. Production forecasts for the next few years are promising and lay a foundation for substantial revenues, both for the companies and the Norwegian society. There is considerable interest in exploring for oil and gas” NPD Director General Bente Nyland said in January.

Despite the higher exploration activity, the current pace of resource growth is not enough, Nyland warned, noting:

“Therefore, more profitable resources must be proven, and the clock is ticking.”

There are a lot of remaining recoverable resources on the NCS, as just 47 per cent of the estimated total recoverable resources on the continental shelf have been produced since Norway became a petroleum producer 50 years ago.  

Most of the undiscovered resources, or more than half of Norway’s remaining oil and gas resources, lie in the Barents Sea, where the opportunities are greatest with vast areas yet to be explored, the NPD says.

Two fields are producing in the Barents Sea right now—Snøhvit and Goliat. A third field will add to the Barents Sea production profile in 2022 and will boost Norway’s oil and gas production—Johan Castberg, with recoverable resources estimated at 450-650 million barrels of oil equivalent, is scheduled for first oil in 2022.

Before Johan Castberg in the Barents Sea, Norway’s Equinor is set to start up a giant oil field in the North Sea—Johan Sverdrup—in late 2019. The first phase of the Johan Sverdrup development is nearly 90 completed, with production start expected in November 2019, Equinor said in June.

With expected resources of 2.1 billion—3.1 billion barrels of oil equivalent, Johan Sverdrup is one of the largest discoveries on the NCS ever made.

The field development will be one of the most important industrial projects in Norway in the next 50 years and at its peak, the project’s production will account for 25 per cent of Norway’s petroleum output, Equinor says.  

According to the Economist Intelligence Unit (EIU), oil and gas investments in Norway are expected to increase between 2019 and 2023 and production will also grow in that period. Investments in 2018 rose slightly compared to 2017, but they will surge this year and remain strong next year, “reflecting strong underlying conditions” EIU said in a report on Norway’s oil sector at the end of June.

“Moreover, since the decline in oil prices in 2014, the sector has taken steps to reduce costs and raise efficiency. These factors should generate consistent rises in oil sector investment throughout the forecast period” the report said.

Norway’s oil and gas industry is set for a few bright years until 2023, but it will need more discoveries if it were to maintain production after the mid-2020s, according to government figures and industry analysts.

Norway also aims to open offshore areas to offshore wind development, expecting wind power development to offer opportunities for Norway’s businesses.

In early July 2019, the Ministry of Petroleum and Energy launched public consultation on a proposal to open the areas Utsira Nord and Sandskallen – Sørøya Nord to offshore renewables.

“Offshore wind power offers great opportunities for Norwegian businesses” Petroleum and Energy Minister Kjell-Børge Freiberg said. “It is now time to prepare for the future development by allocating space for offshore renewables.”

Norway also looks to develop carbon capture and storage (CCS) technology and sees CCS as having “the potential to be one of the most important measures achieving the goal of more energy and cleaner energy” minister Freiberg said in June.

CCS is one of five areas of priority in Norway’s climate policies, but wider cross-border co-operation is needed in order to make CCS a workable solution on a global scale capable of reducing carbon emissions, Freiberg noted.