Norway's Lien charts course for country's oil and gas sector

By KURT ABRAHAM, Editor on 2/23/2016

HOUSTON -- While acknowledging that his country’s E&P activity has been significantly impacted by low oil prices, Norwegian Minister of Petroleum and Energy Tord Lien insisted that Norway’s industry will persevere, and he touted the sector’s longer-term attributes. Speaking to a crowd of invited guests at the Norwegian consulate in Houston on Monday, Lien said that he believes part of the reason for the industry’s ultimate resiliency will be due to the actions of the Progress Party (somewhat right-wing) administration in which he serves.

“One of the key factors of success is broad political consensus, and we’ve been able to achieve that,” explained Lien. “Also, our petroleum policy has a clear division of labor between the government and commercial companies. We have instituted transparency, stability and predictability into the framework of energy. Our goal has been to work with the forces of the free market economy, not against them.” By the same token, he noted that the government also has the goal of securing a large part of the resource rent for the Norwegian people. And he pointed out that the country’s oil and gas sector has benefitted from competition between companies.

That having been said, “Our current status is that our oil production is about 1.8 MMbpd right now, and we sell 11 Bcfd of gas,” added Lien. And while a majority (59%) of lifetime reserves (according to the most recent estimate) in Norway’s portion of the North Sea have been produced, the minister pointed out that considerable resources are yet to be discovered and firmed up in the Norwegian and Barents Seas, including the natural gas portion. “We see a strong future for natural gas,” said Lien. “Between 2016 and 2035, we see 2 Tcm (about 70 Tcf) of remaining gas resources, and then from 2035 forward, we see another 2 Tcm of gas resources. Only one-quarter of all our gas resources have been produced, so far.”

Lien also reiterated Norway’s commitment to resource development in the so-called Northern Areas, including the Barents Sea and portions of the Norwegian Sea. The Goliat field is about to start up production, and in addition to the oil output, associated gas production will be transported to the LNG processing facility at Melkøya. “We have drilled over 100 wells in the Northern Areas and have one producing field onstream already,” noted Lien.

The industry’s impact on the country can’t be denied, said the minister. “Our Sovereign Wealth Fund is now about NOK 6.9 trillion (roughly US$806 billion), as of February 2016,” said Lien. That figure works out to be just over US$156,000 for every man, woman and child in Norway, when taking into account population of 5.165 million. “Petroleum,” he added, “is 15% of GDP, 20% of state revenues, 26% of total investment, and 39% of total exports.”

Meanwhile, it’s been a tough 15 months for Norway’s service/supply industry. “The low oil prices are definitely hurtful to our service/supply companies, especially the new, smaller firms,” said Lien. “Indeed, service/supply is Norway’s second-largest industry, after actual sales of oil and gas. Our service/supply group covers more than 1,200 companies. So, yes, the oil price dropping dramatically has affected us in Norway.”

Still, the government will not allow companies to cut corners in these low-price times, when it comes to protecting the environment while extracting oil and gas. “In Europe, a lot of focus has been on what happened in Paris,” noted Lien, who pointed to the fact that E&P development has to be done in a measured, responsible manner. “For instance, we have a high CO2 tax for upstream oil and gas. By the same token, oil and gas extraction in an environmentally safe manner is just one of three pillars of sustainable energy. The second is social—is it (energy) affordable for consumers—and the third pillar is economic—does it support jobs and growth?

At the end of the day, concluded Lien, the Norwegian government is nurturing the country’s oil and gas sector by doing three key things: 1) Providing stable and predictive policies; 2) Providing and awarding attractive acreage; and 3) Supporting petroleum R&D.

Related News ///


Comments ///


{{ error }}
{{ comment.comment.Name }} • {{ comment.timeAgo }}
{{ comment.comment.Text }}