Investments in Norway’s oil and gas industry, the biggest in western Europe, will fall after reaching a peak in 2014, the country’s main industry group said.
Investments will reach a record of 219 billion kroner ($35.3 billion) in 2013 and 224 billion kroner in 2014 before averaging about 200 billion kroner a year in 2015 to 2018, the Stavanger-based Norwegian Oil and Gas Association said today in its yearly report.
“We’re approaching a peak,” the organization’s economics manager said in a press release. “But activity over the next few years will maintain a high and stable level.”
Uncertainty surrounding costs for developing fields and a tax increase this year are forcing companies to review the profitability of their projects, the lobby said in the report. While exploration spending is expected to remain higher than 30 billion kroner a year until 2018, investments in already-producing fields will probably drop by more than half from 112 billion kroner a year over the next five years.
“There’s uncertainty now,” Gro Braekken, the association’s director general, said in an interview in Oslo. “There’s potential to do more if there are incentives, including on increased recovery.”
Norway’s new Conservative-led government has said it would consider tax changes to stimulate investments in marginal and producing fields, though it will not reverse the tax increase from May.
Costs are expected to rise 19 percent by 2018. “Cost developments are, together with uncertain energy prices, the industry’s most important challenges,” according to the report.