2013-08-31 16:29:49 - New Energy market report from Business Monitor International: "Norway Oil & Gas Report Q3 2013"
Oil production in Norway may be in decline, but the country retains considerable upside gas potential and should continue to be a major force in European energy supply for decades to come. Discoveries of considerable size are clearly still possible in mature areas, as demonstrated by the giant Johan Sverdrup and surrounding oil finds that continue to be made. This, and fresh prospective acreage offered in the Barents Sea, should stimulate new investment from domestic and foreign operators, slow a decline in oil output and spur on gas production within our 10-year forecast period.
The main trends and developments we highlight in Norway's oil and gas sector are:
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* The Norwegian Parliament appears to have
already acknowledged the success of the country's first Barents Sea auction. In mid-June 2013, it voted to open additional Arctic acreages further east, close to the Russian maritime border. The blocks will be put on offer during the 23rd licensing round which is due to open in 2013 and run through 2014. The NPD estimated that the region on offer could hold about 285mn barrels (bbl) of oil and as much as 1.62bn barrels of oil equivalent (boe) of natural gas. Large expectations about the below-ground potential of the Barents Sea already piqued the interest of international oil companies (IOCs). A total of 20 blocks were allocated in the 2013 round to a broad range of companies.
* The Norwegian government published the results of Norway's 22nd Licensing round on 13 June 2013. Out of the 86 blocks initially on offer, 24 were awarded to various consortia totalling 29 companies, with only one not lying North of the Polar circle. The round attracted numerous IOCs bringing a high degree of expertise and investable capital to the Norwegian Barents Sea. Statoil gained ownership in seven licences on three of which it will act as operator. Eni, Total, Shell and ConocoPhillips also obtained stakes in the prospects on offer.
* The giant Johan Sverdrup field's total resource estimates continue to rise. Data from another high-impact find by Statoil - Geitungen - show that it could be linked to the Johan Sverdrup complex. If so, it could add another 140-270mn barrels of oil equivalent (boe) to original estimates of 2.1-2.8bn boe of recoverable resources from the field. Statoil will select a development concept by the end of 2013 and expects first oil at the end of 2018, though we forecast that production will only start to peak after 2020. Other notable discoveries made in 2012 include Statoil's King Lear play and Total's Garantiana find in October 2012.
* Oil production continues to fall. In 2012, crude oil, condensate and natural gas liquids (NGL) production fell 7.8% according to the NPD and we expect total liquids output to average 1.78mn b/d in 2013. Output will continue to decline as major fields such as Ekofisk, Oseberg and Gulfaks mature and produce less in the way of volumes. We currently estimate that production could fall further - though less steeply - to 1.55mn b/d by 2017 as new and large discoveries being made in the NCS will not be brought online quickly enough to replace output losses from ageing fields. We expect production from Johan Sverdrup to help reverse this decline from 2020, and help push production up from a nadir of 1.52mn b/d in 2019 to 1.54mn b/d by 2022.
* Moderate economic growth and increased fuel efficiency will result in a slight increase in total liquids demand. We see demand rising in relatively small quantities over the next few years, from an estimate of 261,100b/d in 2013 to 277,500b/d in 2017. Still, net exports are expected to decline as result of falling production, from an estimated 1.51mn b/d in 2013 to 1.27b/d in 2017. This could fall to 1.24mn b/d by 2022.
* Gas output is likely to increase from an estimate of 118.0bcm in 2013 to 130.3bcm in 2017 based on positive developments in terms of new field development. By 2022, with the likely addition of Aasta Hansteen and possibly Skrugard and Havis, gas output could rise to 144.5bcm. Production growth looks set to outpace any rise in consumption, which should grow relatively slowly due to the following factors: moderate economic growth, an improvement in energy efficiency and Norway's relatively sophisticated gas infrastructure. We expect gas consumption to grow from an estimate of 4.6bcm in 2013 to 5.2bcm in 2017, rising further still to 5.8bcm by 2022. Net exports could rise from an estimate of 113.4bcm in 2013 to 125.1bcm in 2017. By 2022, we see exports potentially exceeding 138.7bcm. This is broadly equivalent to the maximum capacity of Norway's existing gas pipeline export infrastructure..
* Based on an assumed 2013 average OPEC basket oil price of US$108.00/bbl, we are forecasting oil export revenues for the year of US$59.7bn, and total hydrocarbons revenues of US$120.6bn. By 2017, assuming an average US$96.50/bbl, total hydrocarbons revenues should be US$104.8bn. * Data from the Norwegian Petroleum Directorate (NPD) show that oil reserves increased to 6.6bn barrels (bbl) in 2012. The NPD's reserves upgrade follows years of decline in oil reserves seen since 2004; levels had declined by more than 40% since 2011. However, the trend's reversal shows that increased exploration activity, EOR and high oil prices have uncovered more resources or proved up more commercially viable resources.
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