2012-02-03 17:11:01 - Norway Oil and Gas Report Q1 2012 - a new market research report on companiesandmarkets.com

Norway´s oil production may be in decline, but it retains considerable upside gas potential and should remain a major force in European energy supply for decades to come. Discoveries of considerable size are clearly still possible, with the Aldous/Avaldsnes prospect containing a potential 2.6bn barrels. This should stimulate fresh investment on the part of domestic and foreign operators and delay the downturn in output.

The main trends and developments we highlight in Norway´s Oil and Gas sector are:

- The highly significant Aldous discovery in the Norwegian North Sea has grown again, with a further upgrade to contingent resource estimates announced in October 2011. Operator Statoil now estimates that the prospect holds 900mn-1.5bn barrels of oil equivalent (boe), up from previous estimates

 

 

of 400- 800mn boe. It describes Aldous as one of the largest finds on the Norwegian Continental Shelf (NCS).

The upgrade follows similar appraisals at the neighbouring Alvadsnes discovery, which subsequent analysis revealed to be linked to Aldous. The operator of Avaldsnes, Lundin, has estimated that recoverable oil from the combined Aldous/Avaldsnes prospect could be as much as 1.2-2.6bn barrels (bbl), making the joint discovery the largest on the NCS since the 1980s.

- Gas output from Norway´s Ormen Lange gas field should result in Norway becoming the world´s second biggest exporter of gas after Russia. When Ormen Lange reaches peak production, output should reach 20bn cubic metres (bcm). Ormen Lange is a key development for Norway, being its second largest offshore field after Troll, which is operated by Statoil. The deepwater field is located in water depths of 1,000m in the south of the Norwegian Sea and will cost US$11bn to develop.

- Norway will remain a vital gas supplier to the EU. The Ormen Lange, Onyx and Barents Sea Snøhvit projects should ensure that there is no significant decline in gas volumes over the medium term. Production increases look set to outpace consumption growth, ensuring a continued rise in exports. Domestic gas consumption will rise from an estimated 5.2bcm to just 6.0bcm by 2016 suggesting that net exports will rise to 171.8bcm.

- By 2016, liquids volumes look set to fall to 1.79mn barrels per day (b/d). Norwegian oil demand, however, remains very modest. We see demand rising slightly over the next few years from around 218,000b/d in 2011 to 238,000b/d in 2016. Net exports are set to decline at a steady rate from 1.78mn/d in 2011 to 1.56mn b/d in 2016 and just 1.24mn b/d by 2021. It should be noted, however, that the Statoil/Lundin Aldous/Avaldsnes prospect should enter production towards the end of the decade and could significantly boost Norwegian liquids output.

At time of writing, we assume an OPEC basket oil price for 2011 of US$101.90 per barrel (bbl), falling to US$99.40/bbl in 2012. Global GDP in 2011 is forecast at 3.2%, down from 4.3% in 2010, reflecting slowing growth in China, a faltering recovery in the US and a worsening eurozone debt crisis. For 2012, growth is estimated at 3.6%.

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