Predicts record Oil & Gas year in 2023

Oil & Gas Happiness onboard the Deepsea Atlantic drilling rigHappiness onboard the Deepsea Atlantic drilling rig. Photo: Arne Reidar Mortensen/Statoil

Predicts record Oil & Gas year in 2023 in Norway

For the first time in five years, petroleum production declined on the Norwegian shelf in 2018. The Norwegian Petroleum Directorate nonetheless foresees a bright future and predicts a possible record year for Oil & Gas in 2023.

Preliminary figures show that 226.7 million standard cubic metres of oil equivalents were sold in 2018. This is four per cent less than in 2017. Gas sales were also somewhat reduced, and some fields have produced less than expected as reported yesterday.

The Norwegian Petroleum Director, Bente Nyland, is clear on that last year was in no way the beginning of the end of the Norwegian petroleum fairy tale.

“I cannot emphasize this enough: There is a high level of activity on the Norwegian shelf. The production forecasts for the next few years are promising, and the oil fairy tale is barely halfway finished, Nyland states as she sums up the activity in the Norwegian economic sector in 2018. At the same time,” she forecasts the coming five years.

NOK 140 billion on exploration

Part of the optimism is due to the fact that exploration activity last year was considerably higher than in the two previous ones. The number of exploration wells rose sharply, and a record-breaking 87 production licenses were awarded.

There were also 11 discoveries of Oil & Gas on the Norwegian shelf, and from those, it is expected that the petroleum companies can extract 82 million standard cubic metres of oil equivalents. That is more than the resource estimates from the discoveries that were made in 2015, 2016 and 2017.

In addition, investments on the Norwegian shelf are expected to increase a lot this year, as well. This is partly due to the developments that are underway, with Johan Sverdrup and Johan Castberg as the frontrunners.

“In total, investments in excess of NOK 140 billion are expected, excluding exploration in 2019. This is an increase of 13 per cent compared to 2018,” the Norwegian Oil Czar informs.

Forecasts another record year

Despite the increased investments, Oil & Gas production on the Norwegian shelf is expected to decline somewhat in 2019, before it picks up from 2020 onwards and moves towards another peak year in 2023, the Norwegian Petroleum Directorate’s long-term forecasts show.

The increase from 2020 is due to the start-up of fields, including Johan Sverdrup, which will more than outweigh natural reduction from the other fields. Unlike last record year, when oil accounted for most of the production, gas will account for more than half of the production in 2023, Nyland elaborates.

After 2023, the Norwegian Petroleum Directorate predicts a decline in production. An estimated 25 per cent of the resources on the Norwegian shelf have not yet been discovered, but how much of this is found, extracted and sold is anybody’s guess.

“Production can continue to be high after 2023, but then discoveries must be developed, and exploration activity must be maintained. In addition, measures must be taken to increase extraction from existing fields, and the companies must look for more gas. The largest gas resources are to be found in the Barent’s Sea,” the Director continues.

Withstands price fluctuations

The oil price fluctuated wildly in 2018, and as Christmas Eve approached, it reached a bottom level of just over $50 a standard barrel. After that, it has recovered, and on Thursday the oil price was at around $61 a barrel.

In 2019, Nyland predicts that oil prices will continue to be fluctuating. She, however, emphasises that the oil industry has adapted well after the oil crisis in 2014.

“We almost have to assume that the oil price will go up and down and up again in the years to come. Fortunately, the industry has done a good job of reducing costs, and they are less vulnerable to fluctuations. The projects that were adopted in 2018, tolerate the current oil price by a good margin,” the Leader of the Norwegian Oil Directorate concludes.