* Spending slashed, new reserves harder to reach
* Norwegian gas output set to slump post-2020: Eclipse
* Analysts question Norway's production outlook
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Norway is central to Europe's gas supply mix -- its all-time high production of 115 Bcm last year met 25% of the EU's total gas demand -- and the government continues to reaffirm its conviction it should be possible to continue to export at current levels well into the future.
Indeed, in the first two months of 2016, Norwegian gas exports to Europe hit a new record of 20.025 Bcm, 7% higher than the same period last year.
But with upstream spending plummeting, doubts are beginning to grow about Norway's ability to keep gas flowing at such high volumes, even in the short term.
The challenges are many -- as well as reduced investment due to the current low price environment, they include high operating costs, a maturing asset base in the North Sea, and the fact new gas reserves are in harder-to-access and more remote areas in the Arctic.
And even its own regulatory body, the Norwegian Petroleum Directorate (NPD), expects output to slip slightly from the record 2015 high, at least over the next five years.
Nonetheless, energy minister Tord Lien is consistently optimistic about the future outlook for Norwegian gas supplies.
"We exported 115 Bcm last year, about a quarter of the total European Union consumption. Our goal is to maintain a high level of exports to Europe," he said last month.
While conceding it would be difficult to actually increase exports, he said Norway could maintain current levels provided there was sufficient investment.
But therein lies the main problem -- as is the case across the global energy industry, companies are slashing capital expenditure to cushion against significantly lower revenues.
In January, the NPD said total capex on the Norwegian Continental Shelf would fall 10% in 2016 to NOK135 billion ($15.3 billion).
That follows a 17% plunge in total spend last year to NOK150 billion from record investment levels in 2013 and 2014 of around NOK180 billion.
The Stavanger-based directorate said more falls were likely, with spending declining in the next few years toward NOK120 billion.
Lien, though, said companies should be buoyed by the EU's recent energy strategy announcements that made a positive case for continued gas demand.
"If we can be confident of demand from the EU, then investments will be made," Lien told an audience in Washington, D.C., last month.
Analysts and industry players alike are not convinced, agreeing the scenario of continued high Norwegian exports was looking increasingly fragile.
The NPD itself predicts Norway's gas output probably peaked in 2015 at 115 Bcm and expects production to drop to 106.6 Bcm this year.
But it is cautiously hopeful about the coming years, seeing production climbing slowly back up to 111 Bcm in 2020.
That was considered optimistic by Eclipse Energy, an analytics unit of Platts.
According to Eclipse forecasts, Norway's gas output is set to fall gradually to about 90 Bcm over the next five years before suffering a major decline to 50 Bcm by 2027, less than half current levels.
The NPD's own most recent longer-term forecasts are difficult to gauge because beyond 2020 the predictions for gas are combined with those for oil.
It said in January it saw peak oil and gas output in 2024 at 3.81 million b/d of oil equivalent, compared with average production last year of 3.71 million boe/d, before dropping sharply to 3.45 million boe/d in 2030.
"There is much uncertainty connected to gas production in the long term," NPD spokesman Bjorn Rasen told Platts Tuesday.
Jonathan Stern, analyst at the Oxford Institute for Energy Studies, said recently he was increasingly unsure of Norway's future.
"We [the OEIS] are very unconfident about Norway's production," Stern told a London conference in February.
Citing the Norwegian energy ministry's ambition to maintain gas production volumes, Stern said: "We do not see how that can happen in the current price environment. We do not understand how that official projection has been derived."
The geography of Norway's reserves adds to the skepticism.
The new resources Norway plans to tap to maintain production are further north into the Arctic, while its current output comes from declining assets.
Fabio Fiorini, BP lead gas and power originator, said at the London conference that this could see Norway struggle to compete in Europe.
"The North Sea is the past, the Norwegian Sea is the present and the Barents Sea is the future," Fiorini said.
"Future output is further from the market, so it is very unlikely that Norway will increase its market share in Europe."
The geographical struggle adds to another of Norway's big issues, namely the level of its operating costs, traditionally among the highest in the world.
Faced with competition from Russia and the US with their low production costs, Norway looks increasingly uncompetitive.
According to the NPD, costs have now begun to fall to mirror the decline in oil and gas prices -- it says operating costs peaked in 2015 at NOK69 billion and were expected to fall gradually to a trough of NOK59 billion in 2018.
But a closer look at the data showed that included falling costs for activities such as logistics and well maintenance.
What the NPD calls "ordinary operating costs" actually stay fairly static to 2019 at NOK21 billion.
Statoil, in its most recent quarterly earnings report, said its average production cost for oil and gas in 2015 was NOK48/boe, down 3% from the previous year.
In dollar terms the fall was more pronounced -- a drop of 24% to $5.90/boe -- though the cost was not just for its Norwegian output but across its portfolio.
In gas terms, the production cost translates to around $1.04/MMBtu.
Compared with a recently announced production cost number from Gazprom of just $0.40/MMBtu in 2015, it is clear who can produce more cheaply.
And the high-cost/low-price environment is taking its toll on Norwegian producers.
Last month, Statoil said it would close its Veslefrikk oil and gas field in the Norwegian Sea two years early in 2018 due to depressed economic conditions and production volume issues.
Two days before, Denmark's DONG Energy said it was shutting its Oselvar oil and gas field early because of disappointments over the reserve base and a recent $2 billion writedown of its oil and gas assets.
The loss of these fields may not make a big dent in Norway's gas output, but the trend is not positive for the industry.
So, the signs are that Lien's dream of sustained high gas output might turn out to be just that.
* in Bcm/year