Wood Mackenzie estimates that upstream development expenditure in Norway will increase to US$25billion in 2012 – a rise of over 30% compared with 2011 – ranking it fifth in the world behind the US, Russia, Canada and Australia. Furthermore, development capex is estimated to reach almost US$30 billion in 2015, ensuring Norway remains a top five investment destination over this period.
Ross Cassidy, Head of North West Europe upstream research for Wood Mackenzie says: “Norway remains a core country within company portfolios for all existing players. It continues to offer good prospects to create value through increased oil recovery (IOR) in producing fields, satellite tie-backs to production hubs and exploration in mature and frontier areas.
“We estimate that around two thirds of the US$25 billion development expenditure in 2012 will be spent on increasing recovery from producing fields, and the remaining third on new field developments. At this level, Norway ranks fifth in terms of upstream development expenditure, behind the US, Russia, Canada and Australia,” Cassidy continues. “Over the next three years, we estimate over US$82 billion will be invested in Norway’s upstream sector. Statoil and the SDFI will invest around US$40 billion combined, around half of the total investment in this period.“
Wood Mackenzie’s report, titled ‘A review of the Norwegian corporate landscape’, highlights that Norway remains an attractive investment destination for the IOCs and Majors: “We value the Norwegian upstream sector at US$216 billion (Nkr1.3 trillion). For IOCs, this places it in the top ten countries by remaining value. The majors still have a strong foothold in Norway, holding 22% of remaining reserves and accounting for approximately 24% of total production. Norway is a core part of the global upstream portfolio of Total (8% of value), ConocoPhillips (7%) and Eni (5%). Our production estimates out to 2017 shows that output from the majors as a group is expected to decline (excluding Statoil), although Total, Eni and BP are forecast to increase production. The majors are set to invest around US$26 billion over the next three years, around 32% of total development expenditure. A large portion of this is being spent on giant, legacy fields such as Ekofisk and Troll.”
Statoil and the State’s Direct Financial Interest (SDFI) remain dominant players with a combined share of 60% of the total value. Cassidy expands: “Statoil holds around 34% of Norway’s remaining reserves and accounts for around 30% of total Norwegian production. The company remains the most active explorer on the Norwegian Continental Shelf, and in recent years has rejuvenated its portfolio with world-class exploration success at Johan Sverdrup and Skrugard/Havis.”
The Norwegian sector also attracts a mix of large and mid-size international oil companies, niche explorers and European utilities, which as a group account for 17% of total value, shared between some 31 companies. Norway accounts for more than 10% of global upstream value for Hess (12%), Marathon (11%) and Talisman (11%). Lundin Petroleum, has been propelled into the top ten companies by remaining reserves following its exploration success at Johan Sverdrup. Cassidy comments: “The company is entering an exciting and sustained decade of growth, with its production set to increase five-fold post-2020. We also expect to see substantial production growth for Wintershall, Det Norkse, E.ON Ruhrgas and Hess.”