Oil Yield at Norway Highly Dependent on Larger Finds

Production has been rampant in offshore and onshore fields in Norway since 1971. Since the start of production, a total of 107 fields on the Norwegian have yielded oil and gas. The number of fields in production totaled 85 at the end of 2017. Out of this, 66 were located in the North Sea, 17 in the Norwegian Sea and two in the Barents Sea. In 2017, five new fields were brought online, in which 36 exploration wells were drilled on the NCS. 11 new discoveries were made and another nine were still under development at the end of the year. The discoveries are expected to boost resource potential by about 33 million standard cubic meters of oil equivalents.

Of the producing fields, many are mature, while some of them still have considerable reserves. There are other fields with comparatively small reserves. Further, the resource base in these fields gets enhanced when small discoveries in the area are tied in to existing infrastructure.

Undiscovered Resources at NCS

Per the Norwegian Petroleum Directorate (NPD), the undiscovered resources on the NCS are estimated at about four billion standard cubic metres (Sm3) of recoverable oil equivalents or about 54% of all the remaining resources on the shelf. Of the undiscovered resources, 18% is in the North Sea, 19% in the Norwegian Sea and 63% in the Barents Sea.

There are two types of exploration wells — wildcat and appraisal wells. Wildcat wells are drilled to find out if there are hydrocarbon deposits under the seabed. While appraisal wells are often drilled after a discovery has been made to acquire additional data relating to the extent and size. Of the 36 exploration wells drilled in 2017, 24 were wildcat wells and 12 were appraisal wells.

Problems Faced in Increasing Yield

Due to the volatility in the oil prices, most explorers have cut their spending budget. It is unlikely that the explorers will increase their spending unless oil prices are sustained at levels above $60 per barrel. Due to the reduced spending since 2015, there has been low level of activities resulting in lack of big discoveries. This has led to apprehension of lack in supply in Western Europe.

According to NPD, the number of wells drilled offshore Norway declined 3% compared to 2016 and it expects this number to remain at the same level for 2018. In 2017, 17 of the wells were drilled in the Barents Sea, 12 in the North Sea and 5 in the Norwegian Sea. In 2016, 5 wells were drilled in the Barents Sea, 29 in the North Sea and 3 in the Norwegian Sea.

Per the plans submitted by the companies for drilling in 2017, most exploration wells will be drilled in the North Sea. Currently, Norway needs more and larger oil discoveries.

However, cost-cutting efforts and large oil discoveries made prior to the oil price crash are likely to help sustain oil and gas production on the NCS over the next five years.

Exploration Results in 2017 Not Very Satisfying

In 2017, the exploration well — Korpfjell — drilled in the Norwegian section of a formerly disputed area between Norway and Russia, showed immense potential. This northernmost wildcat well is expected to contain more than 250 million barrels of oil equivalent (boe), which failed to meet expectations.

In the 24th licensing round Norway offered 93 blocks in the Barents Sea and 9 blocks in the Norwegian Sea. But due to disappointing Barents Sea campaign in 2017 only 11 companies applied for production licenses including Statoil ASA STO, BP plc BP, Royal Dutch Shell plc RDS.A and ConocoPhillips COP. Statoil, Shell and ConocoPhillips sport a Zacks Rank #1 (Strong Buy), while BP carries a Zacks Rank #3 (Hold).

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Production Estimate

In 2017, Norway’s total oil and gas production increased for the fourth straight year, mainly due to higher gas production. Meanwhile, oil production declined to 1.59 million barrels per day (bpd), down 2%, from 1.61 million bpd in 2016. This was due to an unplanned maintenance shutdown at the Goliat oil field.

In 2018, oil production is estimated to drop by another 2% to 1.55 million bpd, and the decline is expected to continue until 2020. The giant Johan Sverdrup is expected to start production in late 2019 that is likely to help Norway to boost its oil production until 2023.

Conclusion

The total oil and gas production increase will continue till 2023 and is likely to reach 2004 levels. Although oil accounted for most of the production in 2004, gas will constitute about half of the production.

While Norway’s oil production is expected to increase over the next five years, the industry will face another decline after 2023.

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