OSLO: Norwegian oil companies say spending on exploration and production is likely to fall more than previously expected next year, an official survey showed Wednesday, as they continue to delay projects and slash investment.
Oil companies operating in Norway, Western Europe’s largest oil exporter, now expect to spend 150.5 billion Norwegian kroner ($18.37 billion) on exploration and production next year, the weakest figure since 2011 and roughly a third below the sector’s all-time high of 220.7 billion kroner two years ago, Statistics Norway said.
In a similar survey in May, companies had expected to invest 153.2 billion kroner next year. It is highly unusual for the companies to lower investment in the third quarter from the second quarter, the statistics agency said. The additional spending reduction next year was attributed mainly to delayed shutdowns and the removal of old production facilities, the agency said. Oil companies also lowered expectations for spending in 2016, to 163.5 billion kroner, a 16% drop on the year and 1.5% below a similar estimate made in May.
Although the Brent oil price has picked up to $49 a barrel from below $30 a barrel in January, it is still more than 50% cheaper than two years ago, and major oil companies are delaying projects to reduce costs. The oil and gas downturn has dented Norway’s growth, as petroleum activity contributes nearly a fifth of gross domestic product and nearly 40% of export revenue.
Similar downturns in the past have had a long-term effect on Norway’s oil activity. In 1998, Brent plunged by a third on the year to an average $12 a barrel, and Norway’s oil investments dropped 32% over two years. Although prices picked up, spending remained weak and didn’t exceed the 1998 peak until 2005, when Brent traded at an average $49 a barrel.
Today’s spending estimates were lower than expected by analysts. DNB Markets had forecast spending at around 153 billion kroner next year and said an estimate below 150 billion kroner would be considered negative for the economy.
Norway’s oil sector increased spending by 73% between 2010 and 2014, as high and stable oil prices enabled companies to develop projects previously seen as unprofitable, but costs also escalated amid capacity constraints in the global oil-field services industry. Norway produced 3.92 million barrels of oil equivalent a day in 2015, up slightly on the year but 14% below the peak a decade earlier.
