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Natural gas has posted significant…
Constant increases in the costs of oil and gas projects along with a hike in taxes have combined with falling prices to force many oil companies to reconsider their future investments in Norway, delaying Arctic projects and damaging the country’s hopes of reviving its falling oil output volumes, which are at a 25 year low.
The Norwegian Petroleum Directorate (NPD) told Reuters that the costs associated with Norway’s oil sector have nearly doubled since 2005, and last year’s tax hike has coincided with a global effort by oil companies to reduce spending in order to create healthier cash flows.
Statoil has already announced delays to some of its biggest projects, such as the $15.5 billion Johan Castberg development in the Barents Sea and the Johan Sverdup field, which is the company’s largest discovery in decades with an estimated 2.9 billion barrels of oil.
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The NPD also added that Shell has delayed its Linnorm field in the Norwegian Sea, which was expected to begin pumping 100,000 barrels a day, and now Statoil are considering the future of the 50 million barrel Trestakk project. Other projects that have been delayed include the Maria development by Wintershall, and RWE’s Zidane project in the Norwegian Sea.
John Olaisen, an analyst at ABG Sundal Collier, explained that “pretty much all of the projects in the Barents Sea are in danger and I'm reasonably sure that all of the gas projects in the Barents Sea will be put on hold for many years.
The reason for this is a combination of gas prices, costs and lack of infrastructure in the Barents Sea. I don't think these projects are gone forever, they will just be put on hold for some years.”
Brent crude oil spot prices averaged from $108-$112 a barrel over the last six months of 2013, but the IEA has predicted that increased production from Libya, Iraq, and Iran will begin to impact market in the coming years with prices falling to $105 in 2014 and then $102 in 2015.
Ivar Aasheim, the head of Norwegian development at Statoil, has said that “most people who make oil price forecasts see lower oil prices going forward than they thought a year ago. This leads to a bit more careful approach.”
By. James Burgess of Oilprice.com
James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…