Norway’s Oil Sector Faces Existential Crisis
Oil companies have recently focused on frontier exploration drilling in the Barents Sea offshore in Norway, neglecting the powerhouse of the Norwegian oil industry, the North Sea.
Exploration activity in the North Sea—the most mature area of Western Europe’s biggest oil producer—is at an 11-year low this year, which is a concern for the industry’s regulator, the Norwegian Petroleum Directorate (NPD).
“That worries me,” NPD Director General Bente Nyland told Bloomberg in a recent interview, voicing the industry concern that without new oil discoveries, especially in mature areas with well-connected infrastructure, the decline in Norway’s oil production would be even bigger than expected.
Following a continual decline between 2001 and 2013, Norway’s crude oil production rose last year for the third year running, but according to the Norwegian Petroleum Directorate (NPD), oil production this year would be nearly half the volume from the peak in 2000-2001.
Two huge fields discovered in 2010 and 2011, Johan Sverdrup in the North Sea, and Johan Castberg in the Barents Sea, are expected to start operations in 2019 and 2022, respectively, and will lift Norway’s oil production in the early 2020s compared to expected declines in 2018 and 2019.
But after 2025, production and activity are expected to significantly drop off unless there are new discoveries, according to oil major Statoil.
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Norway’s Ministry of Petroleum and Energy, and NPD say:
“Production from new fields that come on stream will compensate for the decline in production from ageing fields. However, in the longer term, the level of production will depend on new discoveries being made, the development of discoveries, and the implementation of improved recovery projects on existing fields.”
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