Oil and gas companies operating in Norway, western Europe’s largest producer, raised estimates for spending next year by 4 percent, driven by higher investments in the development of new fields and rising costs.
Investments are forecast to reach 223.3 billion kroner ($36.2 billion), up from a September estimate of 215.1 billion kroner, Statistics Norway said in a statement today, citing its quarterly survey of producers and explorers. The estimate for this year was lowered 0.4 percent to 211.9 billion kroner.
“A very high investment activity in many development projects is planned for next year,” Statistics Norway said. “Many of these will reach their investment peak in 2014.”
Norway’s crude production is expected to recover after 13 straight years of decline as new fields such as Goliat, Edvard Grieg, Martin Linge and Ivar Aasen start output from next year to 2016, the Norwegian Petroleum Directorate forecast this year.
Investments in field developments will reach 79.4 billion kroner next year, 9.3 billion kroner more than forecast three months ago, Statistics Norway said. The increase is partly due to rising costs in many projects, it said.
While an all-time high, the 2014 spending estimate represents a slowdown in investment growth to 5 percent from an expected 23 percent this year. After a decade of rising spending, oil and gas companies are reviewing the profitability of some projects amid higher costs as record spending has put pressure on their cash flow.
Petroleum and Energy Minister Tord Lien said yesterday the government is looking at ways to reduce offshore industry costs, including tax incentives.
Investments in Norway’s oil and gas industry will fall in 2015 after peaking next year, the Norwegian Oil and Gas Association, a lobby group, said last month, citing higher costs, a tax increase from earlier this year and uncertainty surrounding crude and natural-gas prices.
Statoil ASA, Norway’s biggest energy company, in June decided to postpone an investment decision on its Johan Castberg development in the Arctic Barents Sea, previously seen at as much as $15 billion, because of higher-than-expected costs and more taxes, as well as lower resource estimates.
Statistics Norway’s estimate for exploration spending was lowered by 6 percent to 30.9 billion kroner as oil companies are indicating they will drill less wells next year than in 2013.