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Disappointing results from exploration drilling mean an expected investment uptick in Norway's oil and gas industry will not be sustained beyond this year, and production increases in the next few years will peter out from 2025, the country's main upstream regulator, the Norwegian Petroleum Directorate, said Thursday.
In its annual industry report, the NPD noted that "activity" levels had recovered and that thanks to successful cost-cutting "the general scenario is that the new development projects will be profitable with significantly lower oil prices than the current level."
However, it forecast a further 4.7% drop in crude oil production this year to 1.42 million b/d after a greater-than-expected 6.3% fall last year. It attributed last year's decline to the complexity of some more recently launched fields and a shortfall in drilling activity. This time last year, the NPD predicted the country's crude output would average 1.5 million b/d in 2019.
Further out, however, the NPD reiterated expectations that overall liquids output will return above 2 million b/d in 2020, for the first time since 2011, thanks particularly to the start of production at the Johan Sverdrup field, expected toward the end of this year. It also predicted that crude oil production alone would touch the 2 million b/d mark in 2023, reflecting the start of production in 2022 at phase 2 of Johan Sverdrup and the Johan Castberg project in the Barents Sea.
The NPD now expects total upstream investment to rise by 13% this year to over NOK140 billion ($16.6 billion), but to decline again from 2020, mainly due to a shortfall of recent discoveries, and thus projects for the industry to get its teeth into. By contrast it had forecast flat investment levels in 2020 in its last annual report.
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In addition to the investment boost this year from Johan Sverdrup and Johan Castberg, other investments include the redevelopment of the Njord A platform, which had to be towed away to deal with structural integrity issues and is due back on stream in 2020.
But just three new projects were submitted to the NPD for approval last year, down from 10 in 2017.
A recovery in exploration activity proved Norway's attractiveness, the NPD said. It said 53 exploration wells had been "spudded," yielding 11 oil and gas discoveries totaling as much as half a billion barrels of oil equivalent. But "resource growth at this level is not sufficient to maintain a high level of production after 2025," NPD director general Bente Nyland said.
The NPD also noted explorers had reverted to the North Sea, while drilling had dropped off in the Barents Sea, despite the NPD's view that two thirds of undiscovered resources are likely to be in the Barents. Last year 30 exploration wells were completed in Norway's sector of the North Sea, up from 12 in 2017, while eight exploration wells were completed in the Barents, down from 17 in 2017.
--Nick Coleman, email@example.com
--Edited by Robert Perkins, firstname.lastname@example.org