Despite cost control, efficiency gains and increased offshore exploitation, Norway, the largest oil producer in Western Europe, still has a decline in oil production in 2018 from 2017 and is expected to fall to its lowest level since 1998.
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In its annual report released last week, the Norwegian Petroleum Authority (NPD) said that the country’s oil production fell to 1.49 million barrels a day last year, 6.3% less than the 1.59 million barrels in 2017. The agency estimates that Norway’s oil production in 2019 is expected to fall by another 4.7% from last year, reaching a 30-year low of 1.42 million barrels.
NPD said that the decline in Norway’s oil production in 2018 exceeded expectations, partly because the situation in some new oilfields was more complex than previously thought, coupled with fewer new drilling than expected, leading to production in some oilfields below expectations.
In October last year, German oil company Wintershall warned that its Maria oil and gas fields in Norway did not meet production expectations due to water flooding problems. NPD Director-General Bente Nyland told Reuters this week that these issues are not yet resolved.
Sounds bad? No
The worst news is that after Johan Sverdrup oilfield and Johan Castberg oilfield in the Barents Sea, which is scheduled to start producing oil in 2022, Norway has no major oil discoveries or projects to sustain its oil production beyond the mid-1920s. According to NPD resource estimates, nearly two-thirds of undiscovered resources are located in the Barents Sea.
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NPD has warned oil production since the mid-1920s that Norway’s offshore oil production will begin to decline. Therefore, in order to maintain production levels after the mid-1920s, new large oil fields need to be discovered quickly.
NPD Director-General Bente Nyland said in his report:
“High levels of exploration have proved the attractiveness of the Norwegian continental shelf. That’s good news. However, resource growth at this level is insufficient to maintain high output beyond 2025. Therefore, more profitable resources in the next few years must be confirmed and time is running out.”
Compared with 2017, Norway’s exploration activities increased significantly in 2018, with 17 new exploration wells added. According to the company’s plan, exploration activity is expected to remain high this year, with the number of exploration wells approaching 2018 levels, NPD said.
It also pointed out that the key reasons for the increase in exploration activities were lower costs and higher oil prices, which increased the profit margins of exploration, as well as improved new seismic data in most parts of the Norwegian continental shelf. Data show that, excluding exploration, Norwegian investment in offshore oil industry will grow by 13% this year, exceeding 140 billion Norwegian kroner.
It is noteworthy that Norway’s sovereign wealth fund, the so-called “oil fund”, has invested in the proceeds of its oil and gas industry since May 1996 to ensure that future generations can receive pensions. After decades of operation, the Petroleum Fund has now exceeded $1 trillion and is the largest sovereign wealth fund in the world. But the recent weakening of oil prices and the strengthening of the U.S. dollar have reduced its assets to a certain extent.
According to the ranking of the world’s top 50 oil companies published by the well-known American energy Journal PIW in 2008, Norwegian Equinor (formerly Statoil, the Norwegian national oil company) ranked 27th.
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