Norway's Oil Boom Leads to Higher Costs and Delays

Norway's Oil Boom Leads to Higher Costs and Delays

OSLO - Norway's oil investment boom is set to continue in 2013 but is showing signs of overheating, with higher costs and frequent delays, consulting firm Wood Mackenzie said Thursday.

Oil companies operating in Europe's second largest oil exporter boosted their investments to a record $25 billion in 2012, amid record-high oil prices, but most of it was spent on boosting production in existing fields, "in particular on increasing recovery from giant fields like Ekofisk and Troll," said Malcolm Dickson, Wood Mackenzie's Norway Upstream analyst.

A record number of production licences were awarded in 2012, Wood Mackenzie said, but discoveries disappointed.

In its annual review of the industry the firm said oil service companies are operating at peak capacity, which had led to rising costs. It expected the delays and cost overruns seen in 2012 to continue into 2013.

"Project delays and overspend will be a common feature on the shelf, as companies struggle to access rigs and equipment on time or [with]in budget," Mr. Dickson said.

Norway's petroleum production peaked in 2004 at 4.54 million barrels of oil equivalent per day. In 2011, the petroleum production had fallen to 3.8 million barrels per day. 2012 figures will be released Friday.

2013 is expected to be another record-year for Norway's oil sector, the firm said, with huge investments made in fields like Asgard, Edvard Grieg, Martin Linge and Ivar Aasen.

Wood Mackenzie said the country's oil sector had traded assets worth a record $3.9 billion in 2012, up 70% on the year. A key deal was Statoil ASA's $1.2 billion pact with Wintershall to exchange assets. Another key deal was OMV AG's acquisition of RWE AG's interest in the Edvard Grieg field.

"We expect mergers and acquisitions to continue to be buoyant in Norway in 2013" on the back of high activity, high costs and a tight rig market, Mr. Dickson said.

Discoveries disappointed in 2012, with 14 discoveries totaling 709 million barrels of oil equivalent, down 8% on the year, including the Barents Sea discovery Havis, Norwegian Sea find Zidane-2 and North Sea find King Lear.

The number of exploration and appraisal wells dropped to 43 in 2012 from 54 in 2011, due to a rig shortage and longer drilling times. Wood Mackenzie expected 55 wells to be drilled in 2013.

Seven new developments were sanctioned in 2012, the firm said, which was less than previously expected, but "still healthy."


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