Photographer: Kristian Helgesen/Bloomberg

Here's What's Ahead for Western Europe's Biggest Oil Nation

Updated on
  • Investments set to rise for first time since oil crash in 2014
  • Norway sees potential for new record in output in 2023

After suffering through the worst crisis in a generation, Norway’s oil industry is now back on its feet.

Here are five charts that tell the story of how Norway’s biggest industry tackled the crisis, from the surprising windfalls to the challenges ahead. Most are based on new data from the Norwegian Petroleum Directorate.

1. Recovering Investments

Oil companies in Norway are increasing spending for the first time this year since crude prices collapsed in 2014, the directorate predicted in annual forecasts published last week. Optimism has returned with crude prices hitting $70 a barrel at the same time as drastic cost cuts have made projects even more profitable.

Back in the Saddle

Norway's oil and gas spending is expected to rise for the first time since crude's collapse

Source: Norwegian Petroleum Directorate

Note: Investment figures excluding exploration expenses

2. Costs Slashed

Forced to react as crude prices hit a low of $27 a barrel in January 2016, oil companies not only cut back on activity levels but also implemented sweeping efficiency programs to lower expenses across their operations. Drilling an exploration well offshore Norway cost about 240 million kroner on average in 2017, half the price from 2013 and 2014, according to the NPD. Operating costs have been reduced by 30 percent in the same period.

Cheaper Operations

Costs for operating oil and gas fields have dropped more than expected

Source: Norwegian Petroleum Directorate

Note: Index set at 100 in 2013

3. Production Revival

Arguably the most surprising result of the oil crisis is a spectacular rise in production. Companies have been able to pump more oil and gas thanks to cheaper and faster drilling, smoother platform operations and simpler and quicker development work. After reducing long-term output forecasts in January 2015 and 2016, the NPD raised expectations for the second year in a row last week. Total production is now seen close to 2004’s record in 2023.

Cost Cuts Are Helping

Norway's oil and gas production gets a boost from efficiency gains

Source: Norwegian Petroleum Directorate

Note: Production measured in million cubic meters of oil equivalent

4. Exploration Concerns

But looking ahead, there’s concern. The number of wells drilled offshore Norway was the lowest in almost a decade in 2016 and activity hasn’t picked up since. As discoveries also get smaller, Norway isn’t close to replacing production with new reserves. Explorers must get moving if the country can hope to limit a new drop in output from the middle of the next decade, the NPD’s head Bente Nyland said on Thursday.

Not Searching Hard Enough

Oil exploration off Norway took a hit during the market slump

Source: Norwegian Petroleum Directorate

5. Big Oil Flees

During the oil slump, BP Plc and Exxon Mobil Corp. gave up on their role as active operators on the Norwegian continental shelf, with Total SA all but following suit. After disappointing results in a record exploration campaign in the Barents Sea in 2017, all the majors except for Royal Dutch Shell Plc snubbed a new, Arctic-focused licensing round. That’s created concerns in Norway’s oil industry, as the Barents holds more than half of the country’s undiscovered resources.

Major Indifference

Norway sees lowest interest on record for new acreage as Big Oil retreats

Source: Norwegian Petroleum Directorate

Note: Super-majors defined as Exxon Mobil, Chevron, Shell, BP and Total; available records detailing names of applicants go back to 18th round in 2004

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