Norway cuts 2009 oil and gas capex forecast by 5.5 %

Mar 05, 2009 01:00 AM

Norway's statistics agency cut its forecast for 2009 investment in the country's oil and gas sector by 5.5 % to NOK 137.4 bn (EUR 14.8 bn) and also lowered its 2008 estimates. The forecast, based on input from oil and gas companies, followed months of falling oil prices which have strained the industry, forcing project delays.
"The decrease is mainly due to lower estimates for on-stream fields," Statistics Norway said.

This signals that oil and gas companies have prioritised cuts in investment aimed at prolonging or expanding production at fields in operation instead of curbing exploration spending. Statistics Norway said over the past decade, investment estimates given in March had on average been 5.4 % higher than the forecasts from December. Forecasts generally rise through the year as companies announce new plans.
"The fact that the present estimate goes in the opposite direction is probably due to the worsening economic conditions in the oil industry, mainly represented by the drop in oil prices and the rising input costs," the agency said.

Statistics Norway revised lower 2008 petroleum sector investments to NOK 123.9 bn, down 2.8 % from the December estimate but still 12.9 % higher than in 2007. Still, the figures indicate an 11 % rise in investments this year from 2008, down from a 14 % jump indicated in December.
Analysts said the slowdown in the offshore oil and gas sector, which amounts to about a quarter of Norwegian gross domestic product, was widely expected by the central bank and would not have a big effect on the interest rate outlook.

Knut Magnussen, an economist at DnB NOR Markets, said Norges Bank forecasts in October showed oil and gas investments rising by 10 % in real terms this year.
"This still seems as a fair estimate and today's survey should hence not affect the outlook for interest rates significantly," Magnussen said in a note to clients.

But analysts said the unusual fall in planned investments from December to March heightened concern over outlays in 2010, when a number of already sanctioned projects end.
"There is more uncertainty about 2010, and this could mean next year will be weak," said Nordea Markets senior economist Erik Bruce.

Norway is the world's fourth largest oil exporter and Western Europe's biggest natural gas exporter.
It also has a large oilfield services sector, including offshore contractors and engineering firms, rig operators and shipping companies.

Source / AFX News Limited
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