Tuesday, January 15, 2019

Norway 2019 Oil Output Forecast Cut to 30-year Low

January 10, 2019

(Photo: Jan Arne Wold / Woldcam)

Norway's oil output in 2019 will be smaller than previously forecast and its lowest level in three decades, although it should rebound in the following years, the country's oil industry regulator said on Thursday.

Investment in Western Europe's largest oil producer and Europe's second-largest gas producer, behind Russia, is surging after a decline due to the slump in oil prices in 2014 to 2016.

Despite that, oil output in 2018 of 86.2 million cubic meters (mcm), or 542 million barrels, missed a 90.2 mcm forecast made a year ago, the Norwegian Petroleum Directorate (NPD) said.

NPD head Bente Nyland told Reuters that production last year and this year's prediction were lower than previously expected due to start-up delays and production difficulties at several fields.

The regulator said output in 2019 was expected to be 82.2 mcm, against a previous forecast of 87.2 mcm, but will rise to over 100 million cubic meters next year after Equinor starts its giant North Sea Johan Sverdrup field.

Germany's Wintershall said in October its Maria field in Norway was not meeting output expectations due to water injection issues. "The problems have not been solved yet," Nyland said.

Norway's gas production last year stood at 119.3 billion cubic meters (bcm), also missing a 121.2 bcm forecast. In 2019 it is expected to rise slightly to 119.5 bcm but still below a previous forecast of 121.4 bcm and below the record 122 bcm produced in 2017.

Norway's combined oil and gas production is expected to come close to its 2004 record level by 2023, when production peaks at Sverdrup, which is expected to account for about 40 percent of Norwegian oil output after 2022.

Still, while output in the early years of this century was dominated by oil, the majority of production is now made up of gas, NPD data shows.

The agency does not see major developments that will lift investment after 2019 following the commissioning of projects such as Sverdrup and the Arctic Johan Castberg field.

"More profitable resources must be proven, and the clock is ticking," Nyland said in a statement.

NPD expects oil firms to drill about the same number of exploration wells in 2019 as in 2018 as cost-cutting and higher oil prices raise profitability of new developments.

Costs of development wells fell by more than 40 percent from 2014 to 2018, but operating costs are flattening and exploration costs, which included both drilling and seismic surveys, were expected to rise by about 10 percent in 2019 from 2018, NPD said.

"If not for the recent drop in the oil price, the cost increases going forward might have been steeper," NPD's exploration head Torgeir Stordal told Reuters.


(Editing by David Goodman/Edmund Blair/Susan Fenton)

Related News