Norway’s O&G companies expect investment next year to fall sharply, as oil prices show no signs of recovering in the short-term.
Statistics Norway released an official survey on Tuesday showing that O&G firms operating in the country forecast investment to fall to 192.8 billion kroner ($22.3 billion) this year- down 10% from an all-time high last year.
Oil companies expect to invest NOK171 billion in the O&G sector next year, 6% less than projected in a similar survey released by Statistics Norway in August. The 2016 exploration estimate fell by 35% to 21.5 billion crowns from a prior estimate of 33.3 million crowns. “The downturn is mainly due to significantly lower estimates in the category exploration, within oil and gas extraction,” the agency said.
Source: Statistics Norway
Investments are expected to fall in exploration, midstream transport, and existing fields, the agency said. Spending is expected to slightly rise in new field development, onshore activity, and the shutdown and decommissioning of platforms.
Statistics Norway said the primary reason for the downward revision of 2016 investment plans since August is that O&G firms have reassessed their exploration plans and anticipate drilling fewer wells. The agency said investment in exploration is forecast at NOK21.5 billion in 2016, down 35% from the August forecast.
In a separate report last week, the Norwegian Oil and Gas association said it forecasts oil-sector spending to bottom out at NOK132 billion in 2017 and rise again in 2018.
Norway’s oil sector has approximately tripled investment over the past 10 years, as higher and more stable oil prices spurred the development of previously uneconomic projects.
In the wake of the 2008-2009 financial crisis, many European countries struggled to recover. Comparatively, Norway rebounded quickly. This was in part because oil companies boosted spending in 2011 by 16%, by 17.5% in 2012, and by 22% in 2013 (after a brief spending cut in 2010).
Investment by O&G companies in Norway in 2014 hit an all-time high of 214.31 billion kroner. However, on-year growth had slowed to only 1%.
Norway’s O&G output last year stood at 3.76 M/bopd- 17% below the peak a decade earlier.