Norway Can Boost Investment, Curb Declines with Greater E&P Focus
Opening areas of the Norwegian continental shelf currently closed to oil and gas activities could increase investment by NOK 200-250 billion (US $28 billion) in 2022-40, according to a new KonKraft report.
Submitted today to petroleum and energy minister Terje Riis-Johansen, this study also finds that leaving such acreage closed would strengthen the fall in capital spending on the NCS. Investment could thereby decline to 20% of today's level after 2030.
Petroleum output from the NCS is set to decline from 2015, the KonKraft report notes. Decisions taken today -- or postponed for various reasons -- will thereby have big consequences for the level of production and activity beyond 2020.
Covering production development on the NCS, the report was submitted to Mr Riis-Johansen at the Top Management Forum on December 2, 2008.
"This study focuses on measures which can combat a future decline in oil and gas output," said Per Terje Vold, chief executive of the Norwegian Oil Industry Association (OLF).
"It also shows that Norway stands to lose substantial revenues, expertise and investment if today's politicians fail to make wise choices over the next couple of years. The report identifies opportunities for limiting the expected production fall."
KonKraft makes proposals for specific measures to help curb a rapid decline in oil and gas production from the NCS.
These aim in part to extract as much as possible of the resources in areas already open to the industry by maximising recovery from existing fields, maintaining a high level of exploration and making a continued commitment to new technology and modes of operation.
"The report also points out that making large discoveries is imperative if levels of production and investment are to be maintained," said Vold. "Opportunities for new finds are greatest in areas currently closed to petroleum activities."
The report calculates the possible impact of opening the Nordland VI and VII areas as well as Troms II for exploration in 2012, and finds that it could generate development spending of NOK 200-250 billion in 2022-40. This represents a doubling of the estimated investment level in 2028.
Should access to these areas be postponed to 2020, a substantial reduction in activity is likely with a consequent low level of investment in the 2020s.
That in turn could result in a scaling-back of important activities, leading in the longer run to the loss of knowledge and expertise in key industry areas.
Production on the NCS could fall to roughly 1.6 million barrels of oil equivalent per day by 2030, a decline of roughly 60 per cent from the current level.
If the areas in question remain closed, investment on the NCS could fall dramatically to 20% of the present level from 2030.
These calculations are based on a long-term oil price of US $60-100 per barrel.
"A strong petroleum industry represents the best basis for developing a diversified energy cluster in Norway, which also pays growing attention to renewable sources," emphasised Vold.
The petroleum sector contributes a third of the Norwegian government's revenues and accounts directly and indirectly for roughly 250,000 jobs in Norway.
If the report's recommendations are adopted and lead to good decisions, this industry is likely to continue playing an important role for the country beyond 2040.