Norway Sees Positive Trend in Development Activity

The oil companies have indicated to the Norwegian Petroleum Directorate (NPD) that they plan to submit three times as many plans for development and operation (PDOs) in 2005, as compared with last year.

There has been growing optimism and a willingness to make investments on the part of companies on the Norwegian shelf in the past couple of years. One of the reasons for this is rising oil prices. Today, one barrel of oil sells for about USD 46. Both the companies and the market have a firm belief that the price of oil will remain high in the years to come, i.e. from USD 30-40 per barrel.

"In addition to the fact that more projects are being approved, there is also considerable growth in the companies' generation of new ideas and concepts. We have seen an unprecedented supply of new ideas that enable us to produce more oil. There are no signs that this will stagnate in the years to come. This means that the recovery rate for oil could exceed our target of 50% if this positive trend continues", says principal engineer Erik Søndenå in the NPD.

The evaluation of the profitability of projects and ideas is based on a given price per barrel of oil. A few years ago, this price was USD 13-18 per barrel. In other words, projects that could not tolerate an oil price of USD 13-18 were rejected. Today projects are measured against a price of USD 20-25 per barrel. Therefore, there is a much lower threshold for approving new projects as compared with just a few years ago. Many projects that would have been turned down previously are now pursued and developed into concrete plans.

In the past year, decisions have been made to implement projects with a total of 130 million saleable standard cubic meters of oil equivalents (Sm3 o.e.). As mentioned above, the ideas generated by the companies have increased considerably in recent years. The companies have reported ideas for potential projects that could yield more than 300 million Sm3 o.e. in additional production. If all of these ideas and plans were implemented, this would mean an average recovery rate for oil of 52%.
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