The Norwegian oil and gas industry will see $50 billion less in capital investment from 2016-2020 than previously forecasted as a result of cancelled or delayed projects, according to a study by industry consulting firm Wood Mackenzie.
"Companies are seeking lower cost solutions, be that from cheaper market rates, or different development options," Malcolm Dickson, principal analyst for Upstream Oil and Gas at Wood Mackenzie told World Oil earlier this week.
Ten projects on the Norwegian Continental Shelf have been shelved, the authors of the study found, and an additional three billion barrels worth of projects have been stuck at the pre-final investment decision (FID) phase, waiting for official sanction.
"Mid-2017 is the bottom if you believe in oil price recovery, as we do," Dickson said. "That means that cost inflation will begin to creep into fields from 2018 onwards. FID in the next year or so would make sense to capture lower costs."
Dickson added that many of the proposed projects have breakeven price points in excess of $50 a barrel, meaning simplification, standardization and optimization will be essential to ensure new endeavors are profitable.
"We can't change the oil price, but we can look to bring costs in line with it," the analyst said. "The most prevalent type of optimization has been simplification of projects, such as moving to lower cost drilling techniques, scaling down vessel specification and moving from large platforms to subsea."
The Norwegian government has recently been ramping up a campaign to ensure the country becomes carbon neutral by the year 2030.
The electric car market will be one of the sectors to benefit from the new program as "lucrative" subsidies from the country's massive $890 billion sovereign wealth fund will be used to ensure Norway becomes carbon neutral by 2030. The fund also plans to ban gasoline-fueled vehicles and assist impoverished countries in ramping up their environmental efforts, according to officials.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on… More