Norway expects its oil and gas investments to rise in 2009

Investment spending by Norway's oil and gas industry should rise to some NOK 136 bn (EUR 14.4 bn) next year despite a deteriorating global growth outlook and lower oil prices, a lobby group said. The Norwegian Oil Industry Association (OLF) said it sees Norwegian oil industry investment at a record NOK 126 bn this year.
"Our analysis also assumes that capital spending could rise again next year... (but) looking further ahead, the forecasts become more uncertain," the OLF said.

Based on an assumption that oil prices remain above $ 70 per barrel and a rapid solution will be found to the financial crisis, it is estimated that investment in 2012 might still be as high as NOK 115 bn, the OLF said. The lobby's principal scenario was "based on a positive investment trend continuing through 2010-2012."
"Challenges will be greater if low oil prices persist in a longer perspective, and capital spending on the Norwegian continental shelf could then fall sharply," it said.

But it said that if petroleum investment slows worldwide, it could herald a "rapid upturn in oil prices when the world economy and thereby demand for petroleum return to growth." OLF said the prospect of a rapid decline in production offshore Norway was its biggest concern, as new finds fail to compensate for lower output from mature North Sea oilfields.
"This calls for action by Norwegian politicians," it said, calling for the opening of new exploration areas in the Arctic. "The petroleum sector's current portfolio of new discoveries is not sufficient to maintain a high level of investment as peak output approaches in 2015," it said, adding that Norway's last big offshore strike was the Ormen Lange gas field in 1997.

The OLF also said that there is reason to expect further consolidation of oil companies due to pressure on oil prices and a credit squeeze in financial markets. Norway must also have a strong oil and gas industry to finance innovation and research in renewable energy, because it will take "several decades" before wind power and other sources can be profitable without "substantial subsidies", the OLF said.
It said Norway's renewable energy drive "depends on the government being able to draw on a good cash flow from the oil sector."

"A rapid decline in production from the Norwegian shelf could also mean the decay of the expertise possessed by the petroleum industry," the OLF said.
"That knowledge is crucial for the success of a high-tech commitment to pursuing renewable energy solutions such as offshore wind parks."