Norway’s Oil Boom Leads to Higher Costs and Delays

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Norway’s Oil Boom Leads to Higher Costs and Delays


Category: Energy

Oil companies operating in Europe’s second largest oil exporter boosted their  investments to a record $25 billion in 2012, amid record-high oil prices, but  most of it was spent on boosting production in existing fields, “in particular  on increasing recovery from giant fields like Ekofisk and Troll,” said Malcolm  Dickson, Wood Mackenzie’s Norway Upstream analyst.

A record number of production licences was awarded in 2012, Wood Mackenzie  said, but discoveries disappointed.

In its annual review of the industry the firm said oil service companies are  operating at peak capacity, which had led to rising costs. It expected the  delays and cost overruns seen in 2012 to continue into 2013.

“Project delays and overspend will be a common feature on the shelf, as  companies struggle to access rigs and equipment on time or [with]in budget,” Mr.  Dickson said.

Norway’s petroleum production peaked in 2004 at 4.54 million barrels of oil  equivalent per day. In 2011, the petroleum production had fallen to 3.8 million  barrels per day. 2012 figures will be released Friday.

2013 is expected to be another record-year for Norway’s oil sector, the firm  said, with huge investments made in fields like Asgard, Edvard Grieg, Martin  Linge and Ivar Aasen.

Wood Mackenzie said the country’s oil sector had traded assets worth a record  $3.9 billion in 2012, up 70% on the year. A key deal was Statoil ASA’s $1.2  billion pact with Wintershall to exchange assets. Another key deal was OMV AG’s  acquisition of RWE AG’s interest in the Edvard Grieg field.

“We expect mergers and acquisitions to continue to be buoyant in Norway in  2013” on the back of high activity, high costs and a tight rig market, Mr.  Dickson said.

Discoveries disappointed in 2012, with 14 discoveries totaling 709 million  barrels of oil equivalent, down 8% on the year, including the Barents Sea  discovery Havis, Norwegian Sea find Zidane-2 and North Sea find King Lear.

The number of exploration and appraisal wells dropped to 43 in 2012 from 54  in 2011, due to a rig shortage and longer drilling times. Wood Mackenzie  expected 55 wells to be drilled in 2013.

Seven new developments were sanctioned in 2012, the firm said, which was less  than previously expected, but “still healthy.”

Source: Dow Jones Newswires

Published: October 1, 2013