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Rystad Energy: Norway may reverse oil, gas production decline by 2020

BY KJETIL MALKENES HOVLAND

OSLO -- New discoveries could reverse Norway' s declining oil and gas production by 2020, industry experts Rystad Energy said, forecasting oil companies' annual investments to increase about 50% to $69 billion by 2017, but the access to drilling rigs remains a challenge.

Record-high oil prices and favorable tax rules offshore Norway have led to an oil and gas exploration boom here, and a range of new discoveries could help reverse the country' s oil and gas production decline since 2004, said the Norwegian energy analysis firm Rystad Energy.

In 2020, Norway will produce more than 4 mboepd from 3. mboepd in 2011 and remain among the world' s top three offshore producers, said Rystad Energy project manager Lars Eirik Nicolaisen. "We didn' t expect that a couple of years ago."

On the back of recent discoveries such as the giant Johan Sverdrup field, Skrugard and Havis, Rystad Energy expected oil and gas companies in Norway to increase total investments in exploration and field developments to $69 billion in 2017, from an estimated $47 billion.

To counter Norway' s production fall, more wells must be drilled on mature fields in addition to new field developments. A lack of rigs could become a bottleneck, as the rig utilization is now close to 100%, but Rystad Energy expected the number of available rigs in Norway to increase.

In 2011, we had 31 movable rigs on the Norwegian continental shelf. That number is going up to 49 by 2015, which says a lot about the rig market, said Mr. Nicolaisen, adding there could be additional bottlenecks in securing competent personnel to operate those rigs and for well planning processes.

With global energy demand growing, and conventional oil production unable to fill the gap, oil companies are increasingly turning to ultra-deepwater drilling, and higher oil prices make it profitable to drill more complex and expensive wells than ever before.

Globally, "55% of the oil and gas offshore discoveries made in the period from 2006 to 2010 were in deep waters," said partner Sven Ziegler in the Norwegian ship and offshore broking company RS Platou.

The oil price has been by far the biggest driver for rig demand, he said, adding that RS Platou expected the rig market to remain solid in 2013 and 2014. Rates of floating rigs are approaching the all-time high level of 2008. The access to rigs is limited, but more rigs will be available in 2014 and 2015.

If you look at the oil companies' targets and new projects, there will be sustained high activity offshore Norway, said Ivar Brandvold, chief executive of Odfjell Drilling, which has ordered a new ultra-deepwater semisubmersible rig for deliverance in 2013 and a new ultra-deepwater drillship in 2015.

The company owns and operates several ultra-deepwater and midwater rigs and drillships, and has contracts with Statoil, Petroleo Brasileiro, BP, Total, Anadarko, Lundin Petroleum, and Valiant Petroleum.

It' s a very solid market with long-term high activity, said Mr. Brandvold, who doubted that capacity constraints in the sector would delay new oil and gas projects in Norway. "I think the balance in supply and demand is pretty good for the next couple of years."

Rig operations are 40% more expensive on the Norwegian shelf than on the neighboring United Kingdom shelf, according to a recent government-commissioned report, mainly due to personnel costs that are $50,000 to $75,000 more per day on a Norwegian rig. The cost of drilling a production well offshore Norway doubled from 2000 to 2010, the report said.

With 40 rigs on contract on the Norwegian continental shelf, Statoil is by far the biggest rig customer here. To achieve its target of maintaining its production offshore Norway at 1.4 million barrels per day in 2020, Statoil has taken measures to cut costs and increase efficiency, such as introducing new rig concepts to standardize drilling processes, and awarding longer-term drilling contracts.

We see that we must work with capacity, said Statoil' s head of Rig strategy and procurement, Torgeir Loland. "We must take many initiatives to work smarter and get more out of the rigs we got, and we must always see if we must react to get hold of more rigs in time."

Dow Jones Newswires

09/26/2012

 

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