While fossil fuel production is expected to decline over time to reach the goal of net-zero production by 2050, the Norwegian Offshore Directorate (NOD), which reports to the Ministry of Energy, has developed three scenarios illustrating a decline in oil and gas production and financial impacts. Over $1.42 trillion (NOK 15 trillion) is at risk of being lost if Norway does not intensify its search for the remaining hydrocarbon resources on the Norwegian Continental Shelf (NCS) and use new technologies to increase production levels.
Although Norway is said to have extensive oil and gas reserves on the Norwegian mainland, which could provide the basis for high levels of production, exports and value added for many years to come, according to the Norwegian Offshore Directorate’s new resource report, the European country also faces the possibility of giving up the equivalent of almost an entire state pension fund if it does not choose the right path.
The three scenarios to 2050 show what a difference the choice between high and low oil and gas production can make, even though the NOD still expects overall levels on the NCS to decline after 2025. These scenarios show that the speed at which production cuts will impact depends on several factors. Increasing exploration activities and technological development are seen as key to reaping the benefits of higher oil and gas production in the long term.
Kjersti DahleDirector of Technology, Analysis and Coexistence, highlighted: “That is why we need to increase exploration and investment in fields, discoveries and infrastructure in the future to slow the decline in production. Failure to invest will lead to a rapid collapse of the oil industry.
“The scenarios show significant differences in future value creation and future government revenues from oil activities. The Norwegian Offshore Directorate’s calculations show a difference in net cash flow of about NOK 15 billion between the high and low scenarios.”
Based on the Norwegian Offshore Directorate’s analysis of exploration activity over the last 20 years, oil and gas exploration activity is considered “extremely profitable”, This equates to more than NOK 2 trillion (almost US$189.4 billion). The figures show that the total value created by discoveries is more than three times the cost of exploration during this period.
Therefore, the NOD has underlined the need to maintain activity and production levels over time and to explore additional resources – both close to infrastructure and in frontier areas. Against this background, an increase in knowledge, better data coverage, new working methods and new technologies are seen as an opportunity to open up new exploration opportunities and lead to more profitable discoveries in the coming years.
“Norway and the NCS remain in an excellent position to remain a competitive oil and gas producer for many years to come, as we have significant remaining resources, low emissions, well-developed infrastructure, low operating costs and a stable framework,” emphasized Dahle.
With the intention of increasing the stakes in hydrocarbon exploration offshore Norway, the Norwegian Ministry of Petroleum and Energy launched the Pre-Specified Area Award Round 2024 (APA 2024) a few months ago, covering blocks in the North Sea, Norwegian Sea and Barents Sea.
The Norwegian Offshore Directorate had previously stated that it would like to see greater interest and engagement from oil and gas companies in exploring frontier areas in order to bring the additional resource potential to the market.
Two Norwegian companies recently completed drilling in the Barents Sea. Aker BP discovered gas, but Equinor was not so lucky as its well dried up.
