Norway’s oil output rose in 2014 up to 1.9 million barrels per day (mbd), according to a recent report posted by US Energy Information Agency. Figures increased just by 3.2 percent with respect to 2013, but it represents a change in trend after 13 years of an uninterrupted decline, accumulating an output reduction of 76 percent compared to 2000.
According to EIA’s report, this trend is going to continue during the remaining months of 2015. However, far from being an exception to the reduction of the activity around the world as a result of the drop in oil prices, this output rise responds to operational peculiarities of the Nordic country. The development of activities in Norway, due to its complexity, requires execution terms longer than other places, so the output recovery known until now is a consequence of projects started in 2012, when oil prices moved around $100, twice the current price.
Before the current market condition, Norway, one of countries most exposed to oil price volatility, because the sector is its main economic engine, has adopted several measures in the last months to attract capital to its oilfields, reactivate the industry and shield the national accounts of the first oil producer in Europe, after Russia. As part of these measures, Norway started up a project to develop the Johan Sverdrup deposit jointly with state-owned company Statoil, which expects to invest $14,300 only in the first stage. The initiative may lead to a boost in a decadent investing environment. And as EIA stated, between 2011 and 2013, annual investment in oil and gas industry grew over 15 percent, versus 1 percent last year. Even though this situation does not affect the output level right now, it may drag it in the future if investing encouragement is not revived.
Since oil prices started to fall last summer, several oil projects in Norwegian waters were cancelled or delayed. This is the case of ConocoPhillips, which had to begin the development of the Tommeliten Alpha project in 2016, but it was cancelled at the beginning of the year. The initial estimated investment was $2,100 million. In addition, while E&P investment projects falls down, capital aimed to disable facilities in oilfields rises. In this respect, EIA points out that exploration and development expenditure in the first half of 2015 was 18 percent lower than the same period in 2014, while in contrast the outlay for decommissioning infrastructure was 70 percent higher.
Post by: Jorge Neri Bonilla