Norway Predicts Lower Oil and Gas Investment

Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Norway's government expects that investments in oil and gas projects will be significantly less than expected for 2016 and will fall further in 2017.

Investment in the sector, which stands as one of Europe's leading producers of natural gas and crude oil, has already dropped by 10% this year and the government predicts that next year will see further steep declines. The gloomy outlook comes from the country's statistics office, Statistics Norway, based on the investment plans of its leading production companies. Total investment in oil and gas extraction and pipeline transport for this year will come to just under $20 billion, down 1.5% from a previous estimate in May.

The decline has been attributed to "lower estimates for field development and shutdown and removal". The decrease in field development is partly due to the fact that the government reclassified fields that came on-stream out of the development category and into production. The estimate for 2016 is 17.5% lower than the corresponding estimate for 2015.

"The decrease from 2015 to 2016 is due to lower investments within all categories, but the main contributions come from field development, fields on stream and exploration," the Statistics Office stated.

Cheap crude prices, although they have been recovering over the year, is forcing oil companies to delay or cancel projects to control production levels. Norway's oil and gas industry contributes about a fifth of the country's GDP and represents almost 40% of its export income.

Next year will also be tougher than expected. Investments in oil and gas extraction and pipeline transport for 2017 are estimated at $18.3 billion. This is 1.8% lower than the previous estimate for 2017 made in May and the office said that "a decrease from the 2nd quarter to the 3rd quarter in the year before the investment year is very unusual. This also happened last year for 2016, but until then the last time was in 1999 for the investment year 2000." Overall, the estimate for 2017 is 18.6% lower than the corresponding estimate for 2016. It is the weakest investment figure for the country since 2011.

Last week, Industrial Info reported on state-owned oil and gas giant, Statoil's ASA (NYSE:STO) (Stavangar, Norway) plans to spend around $120 million in developing new parts of the North Sea. For additional information, see August 21, 2013, article -- Statoil Reveals North Sea Development Plan.

In related news, Norway's oil and energy minister Tord Lien reassured the U.K. that its decision to leave the European Union (EU) will not affect the export of gas to the U.K.. Norway is the single largest gas supplier to the U.K., accounting for around 40% of its total demand.

Lien told Reuters: "There is no reason to believe that market access for Norwegian gas exporters to Britain will be affected by Brexit. We have been a stable gas exporter and we will continue to be so."

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