Crude Collapse Forces Cuts in Norway Investment Forecastsby
Norway crude oil production seen declining through 2019
NPD sees number of exploration wells dropping to 30 this year
Norway, western Europe’s biggest oil producer, cut its investment forecasts for the second consecutive year amid a deepening collapse in crude prices.
Investments, excluding exploration, will drop about 10 percent to 135 billion kroner ($15 billion) this year and will continue falling to less than 120 billion kroner in 2018, the Norwegian Petroleum Directorate, the country’s oil-industry regulator, said in a report Thursday. Investments won’t rise again until 2019, a year later than the NPD predicted 12 months ago.
Exploration spending is seen dropping by 33 percent to 22 billion kroner, with 30 wells drilled compared with 56 last year. Exploration investments are expected to fall further in 2017 before rising in 2018.
“The industry is in a crisis now, we can’t deny that,” Director General Bente Nyland said in an interview following a press conference in Stavanger. “We see a tendency for the companies to prioritize short-term earnings rather than long-term value creation.”
The price for the benchmark Brent oil blend reached a 12-year low of about $29.73 a barrel on Wednesday as concerns over economic growth in China add pressure to a global market already oversupplied with crude. With oil tumbling more than 70 percent since the middle of 2014, producers such as Statoil ASA, Norway’s biggest energy company, have reduced investment to shield dividends. The slowdown has already led to almost 30,000 job cuts in Norway, which depends on the oil industry for about a fifth of economic output.
Oil production will fall to 89 million cubic meters in 2016 from 90.8 million cubic meters in 2015 and continue sliding to 80.2 million cubic meters in 2019. While the NPD increased production forecasts for crude for 2016 and 2017 by as much as 3 percent, it lowered them for 2018 and 2019, reflecting the impact of falling investments.
And production could underperform those forecasts, Nyland said.
“We see that fewer production wells are planned, and the cuts could be even more significant if the oil price doesn’t change,” she said. “That’s a big risk.”
Meanwhile, oil and gas production in 2015 exceeded NPD forecasts as companies drilled more development wells, cut maintenance work and European demand for natural gas rose.
Oil production rose for a second consecutive year to 90.8 million cubic meters. That’s still about half a 2000 peak. Gas output hit a record 117.2 billion cubic meters, eclipsing a 107.6 billion cubic meter forecast. Total production is seen at 217.1 million cubic meters this year.
Gas production is expected to drop to 106.6 billion cubic meters this year, rising to about 111 billion cubic meters in 2019 and 2020. The NPD cut its forecast for gas output for every year from 2016 to 2019 compared to prognoses given 12 months ago.