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Norway Warns Lower-For-Longer Prices Will Impact Its Oil Output

Oil production in Norway is being maintained despite the oil price crash and the coronavirus outbreak, but a prolonged period of low oil prices and already reduced exploration activity will impact oil production in the future, the Norwegian Petroleum Directorate (NPD) said on Wednesday.   

As prices collapsed and uncertainty blanketed the global oil market, companies operating on the Norwegian Continental Shelf (NCS) began to announce reduced spending and are likely to defer the spudding of some exploration wells initially planned for 2020, the NPD said.  

At the start of the year, companies were planning some 50 exploration wells for 2020 in total.

“What we're seeing now, is both exploration wells being postponed and delays/cancellations of geophysical mapping. As of today, it appears that around 10 exploration wells will be postponed, meaning that there will be about 40 exploration wells in 2020. However, we can't rule out further changes in this area in the future,” NPD’s Director General Ingrid Sølvberg said.

“At the moment there is considerable uncertainty surrounding which activities will be cancelled or postponed over the next few months,” Sølvberg said, noting that the authority is following developments closely to understand the potential resource consequences of delays and cancellations.

“Substantial cost cuts have been announced, reducing both exploration activity, investments and operating costs moving forward,” Sølvberg said.

“Reduced exploration activity over the longer term will therefore also affect future production on the shelf,” the NPD said.

Shorter term, the crisis will lead to job losses and dramatic consequences for the supply chain of Norway’s oil and gas industry, as highly skilled staff who will lose petroleum industry jobs are likely to find employment in other industries, the NPD warned.

The directorate follows the dynamic nature of developments on the oil market and in Norway’s industry, “But this is a serious and demanding situation,” NPD’s Sølvberg said.

A few days ago, Tina Bru, Minister for Petroleum and Energy of Western Europe’s biggest oil producer, told Reuters that Norway could discuss reducing its oil production if the world’s major producers reach a deal on significantly cutting global oil production. 

By Tsvetana Paraskova for Oilprice.com

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