Norway, seeking to halt a decade’s decline in oil production, said falling crude prices will cause more delays to offshore developments already threatened by investment cuts and rising costs.
Oil prices have become a more important factor in the financial decisions of companies, Bente Nyland, director of the Norwegian Petroleum Directorate, said today. None of the 14 development plans the NPD expected in 2014 and 2015 have yet been presented, she said.
“It’s a combination of oil prices and cost cuts,” she said in an interview in Bergen, on Norway’s west coast, declining to name specific projects. “Those who have a small, marginal project will of course now wait.”
Brent crude has fallen to a four-year low of about $83 a barrel from as high as $115 less than four months ago as global supply exceeds demand, in part because of the shale-oil boom in the U.S.
Oil companies are already reining in investments as they struggle to limit escalating costs and improve returns for their shareholders. Companies operating in Norway may spend 18 percent less next year than a record 227 billion kroner ($34 billion) this year, the statistics bureau said last month.
Statoil ASA, which operates more than 70 percent of Norway’s oil and gas production, earlier this year set out to cut investment plans through 2016 by 8 percent. The 67 percent state-owned company this year delayed its Arctic Johan Castberg project for a second time on cost concerns, and is reconsidering a project to boost oil recovery at its Snorre field in the North Sea.
“We believe the change in the oil price is a fluctuation, that there will be a rise in a little while,” Arne Sigve Nylund, Statoil’s executive vice president for development and production in Norway, said in an interview. “It means what we’re doing, with improvements and our efficiency program, is becoming even more relevant.”
He declined to comment on the oil price’s effect on the profitability of specific projects.