Statoil Spending Cuts Put Norway Projects at Risk, Petoro Says
Spending cuts from Statoil ASA (STL) and other oil companies and rising industry costs will create delays and is endangering projects offshore Norway such as a new platform at the Snorre field, government-owned Petoro AS said.
Stavanger-based Statoil, the operator of more than 70 percent of Norway’s oil and gas output, this month said it would cut investments in the next three years by 8 percent as it seeks to boost shareholder returns amid rising costs. That could hurt Norway’s push to raise oil-recovery rates, Petoro said in a statement posted on its website yesterday.
“Postponements can hit time-critical projects in order to maximize the value of the big mature fields,” Chief Executive Officer Grethe Moen said in the statement. “One example of a project which could end up in the danger zone is a new platform for drilling additional wells on the Snorre field.”
The 67 percent state-owned Statoil’s decision to cut investment plans earned it warnings from the government that it must commit to planned projects. Petroleum and Energy Minister Tord Lien said this month that Norway needs more large companies to increase competition as the country’s oil output has dropped for 13 consecutive years. The Conservative-led government also plans to strengthen Petoro in a bid to give increased-recovery projects higher priority in offshore license partnerships.
“Postponing developments will certainly help to strengthen short-term cash flow for the companies,” Moen said. “But it does not in itself represent an instrument for boosting productivity and reducing costs.”
Statoil plans to build a new processing and drilling platform to increase oil production at its Snorre field in the North Sea by about 300 million barrels. A final development concept decision is due in the first quarter of 2015.
“Its cost nevertheless makes the investment marginally profitable for the companies,” Moen said. “We must accordingly work hard up to the investment decision to make the project more financially robust by reducing costs and enhancing productivity.”
Cash flow from Petoro to the government fell to 124.8 billion kroner in 2013 from 146.9 billion kroner in 2012 due to higher investments and lower gas sales, the company also said in the statement. Capital spending rose 34 percent to 34.4 billion kroner, and will rise to about 40 billion kroner annually in the next few years, Petoro said.
Production fell 9 percent to 1.034 million barrels of oil equivalent a day in 2013.
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