Preface

Jan Bygdevoll, Photo: Emile AshleyThe petroleum activity contributes substantial value to the Norwegian economy every year, and has created value totalling just over NOK 11 000 billion in 2014 money since it began. Big revenues help to create economic security and jobs nationwide. Petroleum operations have been under way for almost 50 years, and forecasts from the Norwegian Petroleum Directorate (NPD) indicate that profitable production and a high level of activity will continue for many decades to come.

Substantial changes have occurred since the NPD last published a resource report covering fields and discoveries on the Norwegian continental shelf (NCS). A record number of fields are being developed. Both recent discoveries and ones dating as far back as the 1970s have been sanctioned for development. Large new discoveries have also been made.

Johan Sverdrup is one of the five largest oil discoveries ever made on the NCS, and the biggest since 1979. Johan Castberg is the biggest oil discovery in the Barents Sea, and the largest north of the 62nd parallel since 1992. Developing them will contribute to a high level of activity in the next 10-year period. Once on stream, they will account for more than a quarter of Norwegian oil production.

The discovery portfolio is otherwise characterised by a number of smaller discoveries under evaluation. Most are expected to be developed with subsea solutions tied back to nearby fields. Given the right decisions in a long-term perspective, good profitability can be achieved through the interaction between field and discovery. The latter can benefit from established infrastructure, while the field can have their share of costs cut, their producing life extended and work on improving recovery continued. Without good utilisation of existing infrastructure, many of the discoveries will probably fail to be developed or bringing them on stream will be considerably delayed and cost more. In that case, fields will have to cease production earlier and the potential for improved recovery cannot be realised.

For positive development to continue on the NCS, planned projects must be profitable. Recently, attention in the petroleum industry has concentrated on cost trends and profitability. High oil prices have meant increased activity and substantial willingness to invest. The consequence has been a higher level of costs, with pressure on profitability as the result. If costs continue to rise, projects could be postponed or shelved. The NPD will keep this position under close observation.

Cost trends in the petroleum industry represent a challenge both for developing discoveries and for committing to projects which can improve recovery from fields. The government has given rights to the oil companies on the NCS. That also confers a responsibility to mature and recover all commercial resources, and helping to ensure that this happens is the NPD’s job as the resource management regulator.

The NPD’s budget has been scaled up in 2014 in order to give increased attention to fields on stream. This report demonstrates that many opportunities exist for recovering large quantities of oil and gas from these sources. But that requires licensees to take decisions and to be willing to make a commitment. The NPD will continue its efforts to ensure that value creation from discoveries and fields becomes as large as possible.

A target of 1 200 million Sm3 has been set by the NPD for the growth in oil reserves during the 2014-23 period. This is somewhat higher than the basis for the NPD’s forecast. The gap between forecast and target is expected to be filled by implementing yet more improved recovery measures on the fields and by forthcoming developments delivering even better than planned. It is also assumed that additional commercial discoveries will be made and sanctioned for development during the period.


Jan Bygdevoll
Director, forecasts, analysis and data
Norwegian Petroleum Directorate


22.04.2014