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New Market Study Published: Norway Oil & Gas Report Q2 2014

New Energy market report from Business Monitor International: "Norway Oil & Gas Report Q2 2014"

 
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Boston, MA -- (SBWIRE) -- 05/01/2014 -- Efforts to slow the decline rate of Norway's oil output are beginning to pay off, with the country registering a drop of 5.2% in 2013 over 2012. Despite this being less than previous years, Norway still registered its 12th consecutive year of oil decline. The gas outlook offers more stability with production expected to stabilise at over 100bn cubic metres (bcm) a year over the forecast. The country's excellent operating environment, combined with strong prospectivity in both mature and frontier basin areas are sustaining interest in the hydrocarbon sector. This is expected to drive a return to oil production growth by 2019. However, we note that growing industry costs, combined with limited incentives to develop marginal fields and improve recovery rates, could hinder investment and production growth in the forecast.

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The main trends and developments we highlight in Norway's oil and gas sector are:

- The Conservative-led administration in Norway is looking to tackle the impact of growth costs in the oil and gas industry in order to increase the competitiveness of the Norwegian petroleum sector. This will be approached by an evaluation of the fiscal changes introduced in 2013 by the outgoing labour government, as well as aligning regulations for floating platforms with regional peers, and addressing the high wage impact of its labour force. In particular we expect to see new incentives introduced to boost investment in improved oil recovery and marginal field development.
- 2014 is expected to see record levels of capital spending in Norway with around US$36bn directed towards the upstream oil and gas sector. This may however mark a peak in investment with expenditure set to fall in 2015.
- Oil and gas sector costs have been increasing at almost twice the rate of overall inflation. Growing concerns about rising costs is expected to make companies more cautious on investment, while simultaneously companies are cutting back capex to retain investor confidence. This has already manifested through Statoil's decision limit capex to US$20bn over the next 3 years and to delay the final investment decision on its US$15.5bn Johan Castberg project.
- The Johan Sverdrup field has also been delayed by up to one year, and is now not expected to see first production until late 2019. The delay has largely been put down to the growing complexity and costs associated with the project. We anticipate other major projects delays in Norway and the prioritisation of higher margin developments over more marginal projects.
- Strong interest in the Norwegian oil and gas sector remains. In January 2014 Norway awarded 65 oil and gas production licenses to a record 48 companies in the latest mature licensing round. Out of the total 65 licences, 38 are located in the North Sea, 19 in the Norwegian Sea and eight in the Barents Sea.

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