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Norway’s oil industry will have to deal with lower profit margins resulting from higher production costs per barrel of crude, Statistics Norway said in a new report as quoted by Reuters.
“In a long-term perspective, it appears that the downturn that began in 2013, when output and prices fell, may have marked the turning point for Norway’s oil industry,” the body said.
Oddly enough, the report comes out a week after Equinor, the state oil major, announced a discovery of up to 100 million barrels in the North Sea, in the Fram field.
“We are making one of this year’s biggest discoveries in the most mature area of the Norwegian continental shelf (NCS), not far from the Troll field. This demonstrates the opportunities that still exist for value creation and revenue from this industry,” Equinor said in a statement.
It is true the company and its peers have had an uphill battle with new oil discoveries, especially in Arctic waters. There have been two major discoveries in recent years in Norway: Johan Sverdrup—the North Sea giant, as operator Equinor calls it—which should start producing by the end of this year, and Johan Castberg in the Barents Sea scheduled for first oil in 2022. Despite a recent proposal from the energy ministry to expand the acreage to be tendered for exploration in the Arctic, so far exploration there has been pretty much fruitless.
This is particularly concerning in the light of the fact that, according to the NPD’s resource estimate, nearly two-thirds of the undiscovered resources on the Norwegian continental shelf lie in the Barents Sea, in the Arctic. This is why so much effort is being put into exploration in the area and this is why the lack of substantial results is so worrying.
And yet, despite these bleak prospects, Rystad Energy said in a recent report that 2019 is shaping up to be the most successful for Norway’s oil industry in five years, after the announcement of the Fram discovery. Rystad Energy estimates the discovery to hold recoverable resources of around 70 million barrels of oil equivalent (boe). This will bring cumulative discoveries year-to-date to 520 million boe, surpassing the 518 million boe found in 2018.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
Norway’s oil production has been declining from 2.458 million barrels a day (mbd) in 2008 to 1.844 mbd in 2018, an average annual decline of 2.5% while exports declined in 2018 by 7.9% from 2017 according to the 2019 Authoritative OPEC Annual Statistical Bulletin.
And while 2019 is shaping up to be the most successful for Norway’s oil industry in five years with cumulative discoveries amounting to 520 million barrels oil equivalent (mboe) compared with 518 mboe found in 2018, these discoveries are relatively small with cost of production much higher than the previous resources discovered many years ago.
Yet, the International Energy Agency (IEA) is bragging about a continued rise in global oil supplies in 2020 from the United States, Brazil, Norway and Guyana.
The hype about explosive growth of US shale oil production by both the US Energy Information Administration (EIA) and the IEA is beyond the pale.
Brazil will be struggling to raise its crude oil production much beyond 2.60 mbd in the next few years given the extremely challenging oil province where its pre-salt oil reserves exist and the very high cost of production.
Norway’s production is continuing its decline whilst Guyana is yet to convert its recent oil discoveries into production. This will take a few years from now.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London