NPD: Cost Reductions, Efficiency Required for Profitability on NCS
Cost reductions and improved efficiency will be required to ensure continued high activity and future profitability on the Norwegian Continental Shelf (NCS), according to the Norwegian Petroleum Directorate.
In a summary of operations on the NCS during the last year, the NPD highlighted that oil and gas companies in the region have already started working to increase efficiency, much to the delight of NPD Director General Bente Nyland who described the cost-cutting trend as "gratifying”.
Several new wells and good regularity on existing fields delivered an increase in oil production on the NCS for the second consecutive year in 2015, and a new gas sales record was also set as a result of higher demand from Europe. Although there was a substantial drop in revenues due to the decline in oil price, the oil and gas industry still made a strong contribution toward maintaining Norway's general welfare level, according to a statement from the NPD. Eighty-two fields were in operation at the end of 2015, compared with 51 ten years ago. Fifty-six exploration wells were spud, with 11 discoveries being made in the North Sea and six in the Norwegian Sea, although no major finds were encountered.
Investments fell by about 16 percent from 2014, to just under NOK 150 billion ($16.9 billion), and are expected to continue their decline going forward, followed by a moderate increase from 2019. The NPD estimates that investments will be well in excess of NOK 200 billion ($22.6 billion) per year in the next few years.
Commenting on the future of the NCS, NPD Director General Bente Nyland said in an NPD statement:
"Activity will remain high in the years to come, in spite of the decline since 2014. Therefore, it is important that the companies make wise decisions and keep a long-term perspective.
"Reduced costs mean greater profitability. This can help pave the way and make it easier to develop more discoveries.”
Although a number of oil and gas majors have cut back on exploration and development drilling in Norwegian waters in the past year, life in the region continues thanks to a variety of independents and juniors who believe the region offers opportunities for them. For 2016, a number of companies are planning exploration wells and progress will be made on a number of field development projects as well.
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