Norway set for output rise, but new finds scarce

• DOI: http://doi.org/10.1111/oet.12739
• Published date: 01 November 2019
• Date: 01 November 2019

FOCUS

Norway set for output rise, but new finds scarce

Norway is set to see output expand over coming years as

major new fields come onstream, led by Johan Sverdrup,

which began production ahead of schedule in October.

But further forward, a declining exploration success rate

and divestment by majors, along with growing contro-

versy over development in high-cost frontier Arctic

waters, could see output decline from the mid-2020s.

Though production was originally scheduled to start

in December, Norway's state-owned Equinor (formerly

Statoil) started production from the country's largest

recent discovery, Johan Sverdrup, which has estimated

reserves of between 2.2 and 3.2 bn bbl, in early October.

Production is set to reach 440 000 bpd by next summer,

which will boost Norwegian output by over a quarter,

and reverse a recent decline in Norwegian liquids output

(see Figure 1.).

Johan Sverdrup's cost of $9 bn was more than a third

under budget ($14.5 bn), making it a successful example of

Norway's recent focus on efficiency, after costs soared

through the boom years pre-2015. There will be a second

phase of expansion, pushing the output figure to 660 000 bpd

in the early 2020s. Johan Sverdrup's crude has similar sulfur

content to the United Kingdom's medium sour Forties grade,

so as its proportion of total Norwegian flow increases over

the coming years, Norway's average crude quality will switch

from light sweet toward a more medium sour mix.

The field also sets an example on how to reduce oper-

ational carbon emissions, with all the energy used at the

four offshore platforms coming via an undersea cable

from the Norwegian national grid, which relies largely on

hydropower and other zero-carbon sources. The field will

be a gateway for further connections from the grid to

other fields in the area, including Edvard Grieg, Ivar

Aasen, and Gina Krog.

1|PEAKING IN 2024?

The start-up of Johan Sverdrup, alongside another 20 or

so development projects currently underway and a num-

ber of others that are expected to be sanctioned, means

Norway's oil output is projected to rise over the next few

years, reaching a peak of 2.5 mn bpd in 2024 (the highest

since 2008), according to the Norwegian Petroleum

Directorate (NPD).

1

The other projects include large field

developments such as Johan Castberg, Martin Linge, and

the Snorre expansion.

This should be supported by a recent increase in

upstream spending, after several years of declines and only

a slight rise last year (see Figure 2), according to Norway's

statistics agency. The state agency recently raised its esti-

mate of likely upstream oil and gas sector investment this

year by 6% to just over $21 bn—17% up on 2018.

The higher spending is reflected in a rise in rig activ-

ity, with consultancy, Rystad Energy, saying in October

that the offshore rig market was being “propelled by the

increased sanctioning of greenfield projects, coupled with

a substantial amount of brownfield work aimed at

maintaining legacy production…Some E&P companies

are even increasing exploration efforts in a quest to

replace declining reserves, resulting in a ‘trickle-down’

effect that is driving up rig counts and day rates.”

2

Subsea

development wells are also forecast to begin a multiyear

growth spurt from next year.

While exploration success has recently been limited,

activity is also on the rise here. Fifty-five exploration

wells are expected to be completed off Norway by year-

end, up from 39 last year, putting activity in line with

boom years in 2013 and 2015, according to Rystad.

Including development and appraisal wells, this makes

130 wells this year, a 16% increase compared with 2018.

Norway is getting more out of existing discoveries as

well. Reserves in existing fields have increased by nearly

9 bn boe between 2000 and 2018, according to the NPD,

thanks largely to innovations in recovery. Cost control and

efficiency gains have also led to a 40% cut in average produc-

tion drilling costs, while operating expenditure fell by 30%

on average between 2013 and the beginning of this year.

However, the state's direct holder of oil field stakes,

Petoro, said cost improvements had stopped and reversed

in the first half of this year; and Statistics Norway's

upward revision to capex could also signal a return of

cost inflation, in what has traditionally been a high cost

region to work in.

DOI: 10.1111/oet.12739

Oil and Energy Trends. 2019;44:3–19. wileyonlinelibrary.com/journal/oet © 2019 John Wiley & Sons Ltd 3