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Petoro: Norway Losing Oil and Gas Revenue

Revenue in the first six months of 2016 from Norway’s oil and gas fields to the state has fallen 29 percent compared to the first half of 2015, according to information from Petoro AS on Thursday.

As mentioned in The Wall Street Journal (WSJ), Petoro said it transferred around US$4.58 billion to public coffers from January to June 2016 as a result of weaker prices of oil and gas. This offset a 4 percent growth in increased output to the equivalent of 1.08 million barrels of oil per day.

The local state-owned oil company also mentioned that the average price paid by the Norwegian government for a barrel of oil in the first half of this year (US$38.90) was 34 percent less than the same period in 2015. Natural gas did not fare much better as the price received by the state dropped by 27 percent.

Last January the government tapped into its US$876 billion sovereign wealth fund for the first time amid a drop in excess oil revenue. This could happen once more since it’s believed that the excess revenue is in the negative after having been US$4.98 billion last year and a record US$45.51 billion in 2008.

Grethe K. Moen, CEO of Petoro, warned oil in Norway must be made cheaper to produce compared to output in other areas.

“We have a fundamental problem with costs on the Norwegian continental shelf,” said Moen to the WSJ. “If we can’t make the necessary improvements, production from existing fields must end sooner than we want, and new projects won’t be profitable.”

The analysis from Petoro comes days after Norwegian oil regulators gave permission for new oil and natural gas operations offshore in the North Sea and Barents Sea. The big winner from this could be domestic state-run firm Statoil, which will operate at three sites including the highly promising Snohvit field in the Barents.

Norway is the largest oil producer and the third-largest natural gas producer in Europe. It's the second-largest supplier of natural gas to Europe after Russia. Nearly three quarters of the oil it produces is exported to European countries.

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By Erwin Cifuentes for Oilprice.com

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