The shelf in 2007 – Investments
14/01/2008 The activity level on the Norwegian shelf is high. Higher oil prices have led to significant increases in both activity and cost levels. Continued growth in total investment costs is expected.
The NPD believes that the investment level will remain high in the next few years. Total investments are expected to exceed NOK 100 billion for 2008. This figure does not include exploration costs (estimated total exploration costs in 2008 are approx. NOK 25 billion). While investments tied to pipelines and land facilities will be reduced over time, investments linked to development wells and facilities will increase.
Figure 1. Investments distributed by pipelines, land facilities, development wells and facilities.
Substantial contributors to the high investment level in 2008 include the Gjøa, Skarv and Tyrihans field developments. In addition come major investments on Valhall, largely connected to a new facility and new wells. Other important contributors are Ekofisk, Ormen Lange, Oseberg, Snorre, Statfjord and Troll II (Troll Oil). The investments there are linked in part to facility modifications, in part to new seabed facilities and in part to new wells. The investments on these ten fields account for about 50 per cent of the total investments in 2008.
One very important explanation for the increase in investments is higher prices per unit. The development in unit prices can be explained by the development in rig rates. Costs associated with hiring rigs is one of the areas experiencing the sharpest growth in prices. At the same time, rig rent has a significant impact on well costs. For wells drilled using a mobile facility, rig rent now accounts for more than 50 per cent of the well costs.
From mid-2004 to the end of 2007, the rig rate for an advanced semi-rig, the dominant rig type currently in use on the Norwegian shelf, increased from USD 150,000 to USD 475,000 per day.
Figure 2. Rate development for semi-rigs
A predominant percentage of investments in the next few years will come from fields in operation and under development.
Figure 3. Investments distributed by resource category