Norway's Oil Sector Faces Existential Crisis

Tyler Durden's picture

Authored by Tsvetana Paraskova via OilPrice.com,

Oil companies have recently focused on frontier exploration drilling in the Barents Sea offshore in Norway, neglecting the powerhouse of the Norwegian oil industry, the North Sea.

Exploration activity in the North Sea - the most mature area of Western Europe’s biggest oil producer - is at an 11-year low this year, which is a concern for the industry’s regulator, the Norwegian Petroleum Directorate (NPD).

“That worries me,” NPD Director General Bente Nyland told Bloomberg in a recent interview, voicing the industry concern that without new oil discoveries, especially in mature areas with well-connected infrastructure, the decline in Norway’s oil production would be even bigger than expected.

Following a continual decline between 2001 and 2013, Norway’s crude oil production rose last year for the third year running, but according to the Norwegian Petroleum Directorate (NPD), oil production this year would be nearly half the volume from the peak in 2000-2001.

Two huge fields discovered in 2010 and 2011, Johan Sverdrup in the North Sea, and Johan Castberg in the Barents Sea, are expected to start operations in 2019 and 2022, respectively, and will lift Norway’s oil production in the early 2020s compared to expected declines in 2018 and 2019.

But after 2025, production and activity are expected to significantly drop off unless there are new discoveries, according to oil major Statoil.

Norway’s Ministry of Petroleum and Energy, and NPD say:

“Production from new fields that come on stream will compensate for the decline in production from ageing fields. However, in the longer term, the level of production will depend on new discoveries being made, the development of discoveries, and the implementation of improved recovery projects on existing fields.

Encouraged by recently opened areas and potentially huge yet-to-be-discovered resources, oil companies launched a record exploration drilling campaign in Norway’s Barents Sea this year. But the drilling campaign was a flop, and even the most promising wildcat yielded no oil.

Companies are vowing to return next year for more exploration in the frontier regions, but they’ve been neglecting the North Sea—the most mature area where Norway’s petroleum history began, and which made the country one of the world’s richest.

The North Sea is still the powerhouse of Norway’s oil with 62 fields in production as of the end of 2016, compared to 16 fields in production in the Norwegian Sea and two fields—Snøhvit and Goliat­—in the Barents Sea.  

This year oil companies drilled a record number of wells in the Barents Sea, which is thought to hold 49 percent of Norway’s undiscovered resources, while the North Sea has 24 percent of undiscovered oil and gas, and the Norwegian Sea 27 percent.

The North Sea’s huge fields have pumped oil and gas for decades and are now maturing. Therefore, Norway needs to add more resources in the North Sea before some of the existing infrastructure, including platforms, is folded and decommissioned, according to NPD’s Nyland.

In an overview of the Norwegian Continental Shelf for 2016, Nyland pointed to “a great deal of uncertainty associated with exploration activity going forward.”

“It is very important to maintain exploration activity at a high level in order to maintain stable production in the future,” she said.  

The Barents Sea was a large part of exploration activity this year, but results were underwhelming.

“Exploration drilling in the Barents Sea in 2017 and 2018 will help clarify future opportunities in the Barents Sea and the Norwegian continental shelf,” Statoil says, but its chief executive Eldar Saetre also points out that the industry needs to heed what NPD’s Nyland has been saying about neglecting the North Sea.

 

“If we continue to see a trend where we’re not making bigger discoveries, we will have to search more in mature areas,” Saetre told Bloomberg in an interview. “This is an important issue,” he added.

As juicy as it sounds, the Barents Sea holds nearly half of Norway’s undiscovered resources, but the North Sea has the developed infrastructure to link new discoveries to existing fields and make even smaller new finds commercially viable when linked to producing areas. So, returning to the old stomping grounds may ultimately pay off.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
HRClinton's picture

Just let in the Muzzies. They'll fix things for ya.

/s

DrumpFired's picture

I smell a rat. Analysts from Shepwave called the buy signal in oil weekss ago. I am convinced they have some serious oil inside information. They admit it by using the name Mr. T is what I think. Some of you here know what I am talking about.

Easyp's picture

Norway has a soveriegn wealth fund worth $ billions they could live off that and fishing for decades.

any_mouse's picture

Valued in USD.

As the dollar dies, the SWF could be worth trillions in USD before the dollar goes to zero.

Much of it may be in real assets.

Unlike the SNB.

Déjà view's picture

TB or not TB...replace B with T...recent article stated Fund had just passed $1 Trillion...

random999's picture

They need to have something after the big reset also. Or shall we call it the purge?

silverer's picture

It's good for about three to four years if you leave it to the politicians. Hey, it's always good to have savings, but the system levels must be carefully maintained.

https://www.bloomberg.com/news/articles/2017-08-09/currency-wars-resurfa...

Ignorance is bliss's picture

Once the fund starts liquidating all the air will rush out if the global ponzi. Your wealth funds will blow away with JP Morgan and Goldman Sacks. You'll starve or fight over crumbs without recourse.

any_mouse's picture

The State Regulator thinks they can increase activity in slow times as well as restrict activity in boom times?

Gov doesn't get reality.

Like creating a massively fraudulent central bank to prevent normal Boom-Bust cycles, thereby increasing the risk and probability of extremes.

Conscious Reviver's picture

And the skim. Don't forget the skim. And the front-running. Don't forget the front-running. And the assassinations. Don't forget the assassinations to protect the scam. Moral hazzard.

OutaTime43's picture

Peak oil. They will never say it openly. 

Nobodys Home's picture

Tundi Horvath was hot.

VIS MAIOR's picture

horvath is hungarian surname(or center europe) most of in hungary . no nowrks

Erwin643's picture

Yes folks, there really is such a thing as Peak Oil.

The U.K. portion of The North Sea hit peak production around 1999, and they became a net importer of oil by 2006.

VIS MAIOR's picture

8000 billions norwegians krones or 8 trillions NOK  NO usd ))

and for one year they need -  1.325 milliarder kroner i neste års budsjett.(2018)  +some extra 200b.

key is: they get back to state per year cca 70% from that 1325 billions "invested" in many of sort taxes and others "pay back" ..

 


1 Alabama's picture

Thats a good question, now what if the answer was a resounding no, limitless problems.

D503's picture

Physics are only real and constant when it's something people want! Infinite growth on a finite plane? Sure, fuck physics!

Chris88's picture

When I was saying Nowasy would start going broke everyone laughed.  One retard in particular here told me how  much money Norway was making,  Come on, let's hear it.  

silverer's picture

Populations are sustainable without oil. The native tribes of many countries and areas have subsisted for centuries on hunting and basic agriculture. To do that again, it may be necessary to "lose" about 70% of the world's headcount in industrialized areas so it will be possible once more.

Ignorance is bliss's picture

I think 70% is a nice start. When populations over grow the environment, the die off can be upward of 90% before it stabilizes and adapts. In other words the die off overshoots what the environment will actually support.

CO2isLife's picture

The socialist utopia will soo find out what other socialist nations have found out. SOcialism doesn't work unless it relies on capitalism. Socialism may work in the short run if your country is located on one of the greatest oil fields in the world, but when it runs out, so does your Socialist Dream. Just ask Venezuela.

Cassandra.Hermes's picture

Norway import 47% of the food and is it is dependent of the oil production, but it has started diversifying it's economy and it is more then ever prepared to survive without oil. My small town was dependent on fishing industry 30years ago when I grew up there, it has a lot of technology companies now and one of them is leading producer of model predictive controllers for USA military and NASA production.

silverer's picture

Problem with that is although you presently have something going it would appear to me it's temporary. After all, you need to get paid for that military and NASA work. The US is a failing empire, and your market for your goods might dry up, and all things technical in my opinion are at risk. You might end up bringing out your fishing poles (and boats) again, so hang onto them.

Fahq Yuhaad's picture

"Oilprice.com"  works with the largest names in financial news and provides news and analysis to sites such as: CNBC, Yahoo Finance, Nasdaq, Fortune, TIME Magazine, Huffington Post, USA Today, CNN Money, Business Insider and hundreds of others."

silverer's picture

It's a good thing the governments of the world plan carefully for the future, eh? So far, mankind should have another few hundred million years to go on earth at least while the sun is still in its main sequence. With these snappy thinking government professionals at the helm, I'm sure the human population won't get there.

surf@jm's picture

And like Venezuela, as Norway's, oil fortunes go, so does the fortunes of its wonderful, much hyped, socialism......

I wonder how Norwegian's prefer their cat and dog?.......Sautéed or fried?.....

Also, toilet paper, may need some stocking up............  

numapepi's picture

Fracking baby...

There are a ton of companies in Texas and Oklahoma that could go there and show them how it's done.

HoPewGassed's picture

Yeah, Statoil's been pretty good to me, but with the 20% dividend taxation haircuts (even in an IRA) on ADR's and future prospects looking bleaker that the industry at large, maybe it's time to find a better dividend payer. 

Maybe I'l just double down on Seagate.  Heh. 

dgolcher's picture

Oh don't worry Bix Weir and some other loonies believe oil to be abiogenic so don't worry you'll never run out of oil!

dgolcher's picture

Oh don't worry Bix Weir and some other loonies believe oil to be abiogenic so don't worry you'll never run out of oil!

Last of the Middle Class's picture

Two large oil field finds haven't even come on line yet and the Peak Oil tin foil hats are whacking off all over the article LOL

dunce's picture

They can drill anywhere in the world just like any oil company but the returns will be reduced by other nations royalty demands. Most other places with oil yet to be discovered have unstable and corrupt govenments.