NPD highlights need for further oil and gas finds offshore Norway

Offshore staff

OSLO, Norway – Exploration activity on the Norwegian shelf is profitable in all areas, according to a resource report from the Norwegian Petroleum Directorate (NPD).

Torgeir Stordal, director for Exploration at the NPD, said: “A diverse range of players, good access to acreage, and a higher volume of better-quality data have contributed to many discoveries.

“In areas with available and cost-effective infrastructure, even small discoveries can create substantial value. Low unit costs also mean that future exploration can be profitable.”

Although exploration activity has been strong across the Norwegian shelf over recent years, the recent fall in demand for oil and lower prices this year have led oil companies to postpone various exploration wells.

The NPD forecasts around 30 exploration wells on the shelf this year, around half the figure for 2019. Stordal warned: “Without new discoveries, oil and gas production could decline rapidly after 2030.”

The directorate’s study of value creation from exploration activity during 2000-2019 shows that the North Sea provided the biggest share of value creation thanks to its well-established infrastructure and various significant discoveries.

In the Norwegian Sea, gas revenues play an important role in activity, while in the Barents Sea, value creation has been lower, although profitability of exploration here rose substantially from 2010 onwards.

The NPD based its analysis mainly on figures supplied by the oil companies and on cost and price assumptions in Norway’s revised National Budget for 2020, with an assumption that the oil price will climb gradually to $50/bbl in 2030.

Average unit costs for discoveries in 2000-2019 were around $25/bbl. If costs can be maintained at this level, future exploration will be profitable even with low oil prices, the report suggested.

But it is important to develop minor discoveries while capacity remains available in nearby infrastructure.

The NPD estimates that around 25% of overall resources across the shelf have yet to be proven. In the North Sea, the undiscovered resources are mainly in areas opened for petroleum activities; in the Norwegian Sea, 65% of the undiscovered resources are said to be in opened areas, while the corresponding figure for the Barents Sea is 45%.

Here the remainder is in currently unopened areas, mostly in the northern Barents Sea.

10/28/2020