Norway’s oil regulator presented its annual status of offshore activity on Thursday. It was a very good year. High production levels, high demand and, in particular, high prices for gas, mean that, during the final quarter of 2021, exports amounted to 100 billion kroner (€10 billion) per month. This is a doubling of what the country was earning at the start of the year and an amount that has never been higher.
The good times seem set to continue. Oljedirektoratet expects production to keep rising until at least 2024, as existing fields are expanded and new fields come on-line. Even after that, things are looking good: Oljedirektoratet reckons that half of Norway’s oil remains in the ground, and that half of that has been located. Crucially, the investment needed to get it out of the ground remains strong.
Twenty new finds were made in 2021. Most of these were close to existing infrastructure in the North Sea, meaning that, even though they are relatively small, they are still worth exploiting, since they can be easily linked into the province’s expansive infrastructure and enter into production without a lot of effort or investment.
Other finds, such as the three that were made in the Barents Sea, will be harder to do anything with right away. One of the Barents finds is large enough to be commercially viable, but even it is less attractive than smaller finds in the North Sea.
Even with all the good news, Oljedirektoratet has a leery eye on the long-term. The new finds in the North Sea have repeatedly extended its life expectancy, but they cannot stop its decline. That leaves the future of Norwegian oil largely dependent on what happens in the Barents, which is estimated to contain half of the remaining oil reserves.
As yet, the Barents is more important for its potential than any actual production. Currently, just two fields are turning out anything. Two more huge fields are due to start up in the coming years, and that may mean a return of the enthusiasm the province was originally met with when the first finds were made there in the 1980s.
If anything is to become of the Barents, more big finds will be needed so that it becomes feasible to build up the sort of infrastructure that is found in the North Sea. The two coming fields, as well as one of the existing, for example, require the use of what is known as an FPSO. This type of vessel (examples of which are pictured above and below) serves both as a drilling rig and export terminal and is used in areas that are far removed from land or existing offshore pipelines. They are more expensive to build and trickier to operate than ordinary drilling rigs, making them an option for only the largest fields.
With no transport net for gas, the Barents is less attractive to explore than other areas, admits Torgeir Stordal, an Oljedirektoratet official. The hope is that, as more big fields that are viable on their own are established, it will lead to the construction of infrastructure that can make smaller finds profitable.
That could happen most easily if a field is found adjacent to the fourth Barents field, which is located relatively close to land and connected by a gas pipeline Norway’s northern coast. If strikes are made in nearby fields, the pipeline could be extended. More gas coming ashore would require the terminal to be expanded, however, and these projects are wildly expensive. One, in connection with a monstrous find, has already been turned down.
Still, two big fields coming on-line would be a much-needed shot in the arm for the Barents since it may entice producers back after a series of lacklustre years that has seen them turn their attention back to the North Sea.
Ingrid Sølvberg, the head of Oljedirektoratet, understands why drillers want to exhaust their opportunities in mature areas before moving on to frontier, but says they are ignoring potentially bigger payouts in unexplored areas further away from existing infrastructure.
“Even though the chances of making a find here is smaller, the chances of making a big find are biggest.”
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