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Oil and gas production costs on the Norwegian Continental Shelf (NCS) rose by 7 percent in 2018 compared to 2017, ending a streak of several years of continuous cost reductions, Norway’s state-owned oil and gas firm Petoro said in its annual report on Thursday.
Petoro, which manages the Norwegian government’s stakes in Norway’s oil and gas fields and is a partner in many licenses on the shelf, delivered a total of US$13.8 billion (120 billion Norwegian crowns) to the state in 2018, up by US$3.8 billion (33 billion crowns) compared to 2017, in one of the best years ever in Petoro’s history, the company said.
However, Petoro noted that the effect of the drastic cost cuts has started to level off.
“We are not seeing the results of further efficiency gains on our bottom line for 2018,” Petoro said.
The 7-percent rise in costs is worrying, the company noted, adding that “We are dependent on the efforts made in recent years having a lasting effect, so that we can reduce costs further through continued improvement in all parts of the value chain.”
“The Norwegian shelf is better-equipped now than it has been for quite some time. Over the last few years, we have matured robust projects that are competitive, even with significant price fluctuations. This is a competitive advantage we must work hard to preserve,” Petoro’s president and CEO Grethe Moen said.
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Cooperation and an innovative supplier industry will be crucial for boosting competitiveness on the NCS going forward, according to the company.
Over the past few years, operators offshore Norway have significantly cut costs, and the Johan Castberg oil field in the Arctic Barents Sea is one of the examples of those cost reductions.
After the oil price crash in 2014, Equinor and its partners in Johan Castberg—Eni Norge and Petoro—changed the plan concept and tried different solutions to halve the initial capital expenditures of more than US$12.4 billion (100 billion Norwegian crowns) and to make the project profitable at below US$35 a barrel of oil, compared to the original breakeven oil price of above US$80 a barrel, Equinor said last year.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.