Summary

22.04.2014

This report deals with resources in fields and discoveries on the Norwegian continental shelf (NCS) and the NPD’s assessment of opportunities for realising the greatest possible value from these. Of remaining resources estimated to total eight billion standard cubic metres (Sm3), proven quantities account for 4.8 billion Sm3 or 63 per cent. Seventy-seven fields were in production at 31 December and 13 were being developed, while 88 discoveries were under evaluation for development.

Production over the next few years will come from fields on stream and under development. The NPD estimates that overall oil production on the NCS will remain stable, while gas output increases somewhat. Discoveries which are developed will eventually contribute a steadily increasing share of production.

Fulfilling the forecast for oil and gas production depends on a number of conditions. Key factors will be whether the companies, given the price and cost position they face, can develop and implement profitable projects, and how far it will be possible to maintain and exploit the established infrastructure on the NCS.

The petroleum industry creates great value, and its socio-economic profitability is considerable. High oil and gas prices have created an international boom in the petroleum sector, with high capacity utilisation and substantial cost growth as a consequence. Both the development of discoveries and improved recovery from mature fields become more demanding when costs rise. The growth in costs threatens the profitability of future projects. This represents a challenge for the whole sector, and one which the industry, the suppliers and the government must work to overcome.

Realising the highest possible value from fields and discoveries calls for long-term solutions. An extensive and integrated infrastructure has been developed over time on the NCS. Efficient utilisation of this infrastructure may create great value for Norwegian society. Collectively, just under NOK 3 000 billion in today’s money has been invested in installations, pipelines and land facilities. Phasing discoveries into existing fields can exploit this capacity while extending the producing life of the fields. This also provides space for new measures on the fields which can improve recovery from them. At a time when the industry is paying increasing attention to short-term goals, such as the current return on capital invested, choosing good and long-term development solutions will be extremely important.

A substantial number of improved recovery projects are being pursued on the various fields. Additional wells will be required by large proportion of these, and new facilities are needed – both subsea and on the surface – on a number of fields in order to secure them. It will normally be the case that the most profitable resources are recovered first from a field. As production progresses, implementing improved recovery measures can become more demanding. A high level of costs reduces opportunities for pursuing this type of measure.

Discoveries under evaluation for development could contribute substantial production in the time to come. Johan Sverdrup and Johan Castberg are large finds which will require their own installations and infrastructure. Most other discoveries are smaller and lie close to existing infrastructure. Development plans for the bulk of the smaller discoveries are accordingly based on subsea solutions phased into the established fields.

Although a high level of costs presents major challenges, remaining resources in fields and discoveries are also substantial. That represents an important motivation for finding solutions and realising resources. The industry has also faced big challenges earlier, but found solutions. Given that background, the NPD takes a positive view of future progress on the NCS. It believes that the petroleum industry, in collaboration with the government, will overcome the cost challenge so that infrastructure on the NCS can be utilised better and new improved recovery measures can be implemented.

The petroleum activity also has an impact on the environment, particularly through emissions to the air and discharges to the sea. The NPD contributes to the establishment of good solutions and to ensuring that the industry’s environmental impact is as small as possible.

This report sets a new target for the growth in oil reserves, which represents an extension of the target introduced in 2005. That was an increase of 800 million Sm3 in reserves to the end of 2014. Although reserves have increased substantially since 2005, the growth target does not appear to have been met completely.

In the NPD’s view, decisions on implementing planned projects for improved recovery and developing discoveries will boost reserves by 950 million Sm3 by the end of 2023. The NPD’s target for the 2014-23 period is an increase of 1 200 million Sm3. It is assumed that the gap between forecast and target will be filled by the implementation of even more measures on the fields, by further optimisation of forthcoming development plans, and by continuing to make commercial discoveries which are sanctioned for development during the period. 

Resource classification

A classification system is required in order to maintain an overview of petroleum quantities on the NCS. Resources are classified in accordance with the NPD’s classification system, which was developed in 1996 and has remained unchanged since a revision in 2001. Classification embraces the total quantity of recoverable petroleum. Since petroleum is produced through industrial projects, emphasis is placed on the ability to follow these projects through their various phases. A field could be developed in several stages and will therefore embrace a series of projects. The maturity of these varies in terms of design, development and production. The NPD’s system classifies petroleum quantities in the individual projects by their maturity.

The system is divided into three classes: reserves, contingent resources and undiscovered resources. Reserves are petroleum quantities covered by a production decision. Contingent resources are recoverable quantities which have been discovered but not sanctioned for development, and projects for improving recovery from the fields. The classification uses the letters F (first) and A (additional) to distinguish between development of discoveries and deposits and measures to improve recovery from a deposit. Undiscovered resources are those petroleum quantities which could be proven by continued exploration and which could be recovered. Quantities produced, sold and delivered comprise aggregated production. All recoverable petroleum quantities are termed resources, with reserves as a special category of these.

Each class is divided into various categories depending on the status of the projects.

 

NPD’s classification of petroleum resources - Download pdf

NPD’s classification of petroleum resources.