Record Investment Indicates Norway As Top Investors' Pick
Despite the recent attempts of the British government to free up the £200 billion investment needed to avoid power shortages after 2015, Norway remains the top pick for analysts and investors. It comes as no surprise that the investments of the Norwegian oil and gas industry will rise to an all-time high in 2014.
“Norway is the most stable country in Europe. It remains my top pick,” said an investment banker to Natural Gas Europe.
He explained that Norway is the most attractive country both on a political and financial level.
“The British industry will remain under pressure in the next years,” he said, suggesting that the political campaign for the 2015 General Election will hinge on energy policies.
On the other hand, Norway also remains a safe heaven in terms of discoveries and reserves. The potentials of the Norwegian Continental Shelf are a certainty in the medium term.
“I expect most of the new offshore discoveries to be in Norway, not in the United Kingdom.”
RECOVERY RATES AND UNDISCOVERED RECOVERABLE RESOURCES ON THE RISE
After the government changed its exploration policy about 10 years ago, allowing new companies to invest in the Norwegian Continental Shelf, discoveries and other achievements supported the industry’s optimism.
Recovery rates went up to 46% in 2013 and are expected to grow further, as Norway's Minister of Petroleum and Energy Tord Lien announced his intentions to change the existing procedures and regulations in order to reduce exploration costs.
The sustained efforts also lifted the undiscovered recoverable resources in the NCS. The Norwegian Petroleum Directorate provided in April an estimate between 935 million and 5,420 million scmoe (standard cu m of oil equivalent).
“Excellent subsea work and use of new technology have contributed to a more than doubling of the recoverable reserves in the main reservoirs on Oseberg, from 1.1 to 2.6 billion barrels of oil,” Kjetil Hove, Statoil’s senior vice president for Operations North Sea east, said in a note released last week.
The Oslo-based oil major is the operator of the field and the first company to reap the benefits from the recent achievements. The lifetime of the Oseberg field has doubled and current plans indicate a production till around 2040.
As a consequence, Norwegian Continental Shelf keeps attracting investors’ attention. The Norwegian Petroleum Directorate has indeed granted 54 drilling permits since January 2013. After a low of 5 exploratory wells in 2005, Norway is back on track to beat the record of 50 wells a year registered in the 1980s.
Adding to the picture that Statistics Norway expects all-time high investments in 2014, the medium term of the Norwegian Continental Shelf clearly is rosy.
‘Total investments in oil and gas activity in 2014, including pipeline transportation, are now estimated at NOK 223.3 billion (€25.2 billion); an increase of NOK 8.2 billion compared with the estimates given in the previous quarter. The estimate for 2013 is adjusted downward to NOK 211.9 billion (€23.9 billion),’ reads a note recently released by Statistics Norway.
CASTBERG IS THE FIRST CANDIDATE FOR MORE DISCOVERIES
The exploration success on the NCS is on average 49%, with Statoil registering a 70% success rate over the last five years. Taking into account that Statoil plans to drill 20-25 exploration wells in 2014, analysts logically expect new discoveries in the next months.
The most promising areas are in the Barents Sea in the Hoop licences and close to the Johan Castberg discoveries (Skrugard and Havis). The recent oil and gas discovery in the Skavl prospect grants further momentum to the area.
"We are working closely with our license partners to establish a plan for further exploration drilling in the Johan Castberg area. The Drivis prospect has already been approved for drilling in 2014, and we are currently evaluating additional opportunities," Gro G. Haatvedt, Statoil's senior vice president for exploration on the Norwegian continental shelf, commented in a note.
Statoil will also continue its campaign in the North Sea around the King Lear discovery and in the greater Utsira High area. In the Norwegian Sea, the oil and gas major will proceed with deep-water explorations in the Aasta Hansteen area.
“We are confident there are new, exciting opportunities to be explored on the Norwegian continental shelf going forward," Haatvedt recently said commenting the exploration plans for the NCS in 2014.
Higher level of optimism has been evident on the NCS in the last five years. It is more than likely that 2014 will translate optimism into financial opportunities. The outlook remains positive, despite the changes in the tax framework and the potential uncertainties stemming from a new government.
Clear commitment and continues efforts pay. The 23rd licensing round, which will take place in 2014, will probably teach another lesson to the UK and the rest of Europe. The strategy to promote a large-scale 3D data acquisition ahead of the licensing round will produce results. It is an example of how to reduce costs and increase certainties. Something Norwegians are good at.
Sergio Matalucci