Norwegian oil production is declining while natural gas production is increasing. While 2009 saw a record number of exploration wells spudded and completed, that figure is expected to be lower this year, according to Bente Nyland, director general of the Norwegian Petroleum Directorate (NPD). The directorate handles oil and gas resource management and administration as well as issues related to the country’s CO2 tax. Nyland discusses how operators are being encouraged to increase the ultimate recovery rate of producing wells offshore Norway and the status of several major projects scheduled to come online in the next few years.
World Oil: How do you see production on the Norwegian Continental Shelf trending in the next few years?
Bente Nyland: Oil production is declining, gas production is increasing—the overall picture is that petroleum production will remain more or less at today’s level for the next decade.
During 2010–2014, oil production is expected to fall compared with the preceding five-year period, i.e. an estimated total production of 3.1 billion bbl of oil, 1 billion bbl less than in the previous five-year period. Also, 99% of the oil production during the period is expected to come from fields in operation or from fields which have been approved for development. This includes measures to improve recovery from the same fields.
WO: Please discuss the status of some major projects slated to come online on the Norwegian shelf.
Nyland: The new field developments to come are smaller than the large ones we had before, but they provide considerable activity. This also applies to re-development of fields in production. Investments in the next few years will also be at a high level—the same as in 2009—but will have a different impact on the various sectors in the contractor industry.
In 2010, as many as seven new development plans may be submitted for approval.
In 2009, the authorities approved PDO [plans for development and operation] of the Eni-operated Goliat oil field, the first to be developed in the Barents Sea. The licensees plan to start production in 2013, and a floating facility will process, store and load the oil on the field. The intention is for Goliat to be partially supplied with power from land.
Also in 2009, authorities approved the PDO of the the Oselvar oil and gas field in the North Sea. Dong E&P Norge AS is the operator. The field will be developed with a seabed installation with three production wells, and the oil and gas will be sent via pipeline to the Ula platform for processing. Production is scheduled to start in November 2011.
A PDO also was approved for installation of a third rich gas pipeline from Troll A to the processing facility at Kollsnes, and for gas injection from Troll B. These two projects will contribute to extend the lifespan of the Troll Field.
A PDO for the Gudrun Field was delivered in February this year. Recoverable oil and gas reserves are estimated at 70 billion bbl and 6.6 billion standard cubic meters, respectively. The estimate for total investments is about NOK 21 billion. The licensees plan to develop the field with an independent platform, with oil and gas export via Sleipner and on to Kårstø. Gudrun has good environmental solutions, including separation of CO2 from the gas and re-injection into the Utsira Formation at Sleipner.
WO: What technological “sound barriers” still need to be broken in order to maximize the productive potential of the deepwater NCS resources?
Nyland: In the short term, it is important that more production wells are drilled cheaper and more efficiently to increase recovery. Maintenance of wells, both production and injection wells, is important. In the long term, increased injection of gas must be implemented, including CO2 and more advanced chemical injection. The NPD is concerned with implementing pilot projects across the various licenses in order to test new injection methods.
WO: How is the NPD encouraging operators to increase the ultimate recovery rate of producing wells offshore Norway?
Nyland: The Norwegian tax system entails that the companies and the state share both the risk and the profits. This encourages the companies to increase recovery beyond the stipulated plans when PDOs are approved. In addition, the NPD follows up the licenses to ensure that good recovery strategies are adopted. If we are not satisfied, we bring this up with the companies. Also, the companies must commit to the greatest possible value creation from the fields in connection with the license awards.
WO: According to the NPD, 2009 saw a record number of 65 exploration wells spudded, 72 exploration wells completed and 21 new discoveries made in the North Sea and seven in the Norwegian Sea. Do you anticipate this level to continue during 2010?
Nyland: Even though the figure is expected to be somewhat lower in 2010 —between 40 and 50—the exploration level will still be high. The APA [Awards in Predefined Areas] scheme has contributed to the high level of exploration activity. There are still commitment wells to be drilled, both in the APA areas and in other areas opened on the shelf. The NPD assumes that the exploration activity will remain at a high level as long as the oil prices are as high as they are now.
WO: How do the European Union’s greenhouse gas trading scheme and Norway’s CO2 tax affect E&P operations in Norway? If higher operational costs are involved, what are they on a per-barrel or per-Mcf basis?
Nyland: As early as in 1991, Norway introduced a CO2 tax on production of oil and gas. This tax is somewhat higher than the quota price. Thus, the EU’s gas trading scheme does not affect E&P operations in Norway. The current price is about €40 per ton of CO2.
WO: What are some of the ways the NPD is helping or encouraging operators to reduce greenhouse emissions?
Nyland: The NPD has participated in the government’s work on Climate Cure 2020. The introduction of the CO2 tax in 1991 led companies to focus more on energy-efficient operations. Many CO2 reduction measures were implemented as a consequence of the tax. Reduced flaring and upgrading of turbines are examples of measures that have had a major beneficial effect.
In addition to this, in 1996 the Norwegian Storting [national legislature] decided that all new developments on the Norwegian shelf must evaluate electrification as a means to run the fields.
WO: Please describe the Climate Cure 2020 program, its impetus/motivations and current status?
Nyland: Climate Cure 2020 has studied measures for the Norwegian petroleum industry which in total could reduce greenhouse gas emissions by 5.5 million tons of CO2 equivalent. The measures in the petroleum industry cost in the range of NOK400 to NOK4,000 per ton of reduced CO2.
There is significant uncertainty regarding both the cost estimates and technological development.
Estimates indicate that a reduction of up to 3 million tons of CO2 could be accomplished by 2020 through energy efficiency, electrification and carbon capture and storage.
WO: Would you discuss some of the new technologies that could result in reduced CCS costs?
Nyland: Current concepts for carbon capture from flue gas are demanding in terms of space and weight. Both are core problems when it comes to carbon capture offshore. Carbon capture plants offshore require quick implementation due to falling production. New methods and technologies—for instance, use of membranes—that scale down the plant size and weight could change the cost picture. This is just one of the topics being worked on by the Norwegian research institute Sintef as part of their BIGCCS project.
WO: What is Norway’s philosophy when advising other governments concerning foreign petroleum investment and taxation policy?
Nyland: The Norwegian government has established the Oil for Development Initiative to assist developing countries, upon their request, in managing petroleum resources in a way that generates economic growth, promotes the welfare of the population in general and is environmentally sustainable. An important part of this work is to assist in the establishment of a legal and contractual framework that secures that the host state gets a fair share of the resource rent, reflecting the petroleum potential and economic conditions prevailing in the country. Extensive capacity building to enable the host states to negotiate reasonable fiscal terms and to protect long-term resource management issues is also a focal point in the cooperation. 
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THE AUTHORS
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Bente Nyland is a trained geologist with a degree from the University of Oslo. She began her career as an Exploration Geologist for Statoil, where she worked for five years. She began working for the Norwegian Petroleum Directorate as a Senior Geologist in 1984, and took her first management position in 1989. She became a member of the organization’s senior management team in 2000 and was appointed Director General of the NPD in December 2007. Ms. Nyland has held a number of board positions, including as a Director of the Norwegian Geotechnical Institute, the Institute for Energy Technology and the University Fund at the University of Stavanger. She is also a member of the program committee for Offshore Northern Seas.
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