Investments for the future on the Shelf
Norway has definitely fortified its role as a predictable, long-term supplier of energy to Europe. Only rarely have we seen so much oil and gas produced on the Norwegian shelf as was the case last year – and only rarely have we seen such significant investment decisions.
2022 was a year marked by the war in Ukraine and the energy crisis. These factors also impacted activity on the Norwegian shelf. The disappearance of Russian gas on the European market led to greater demand for Norwegian gas, which caused Norway to become the largest supplier in Europe by the end of last year. Some of the underlying causes for this development are that the authorities granted permits to increase production from several fields, there was a high degree of operational stability and Snøhvit also came back on stream after a lengthy shutdown.
Gas production was nine billion standard cubic metres (Sm3) higher in 2022 compared with the previous year. Gas now accounts for more than half of production from the Shelf. A total of 122 billion Sm3 of gas was produced. Numerous investment decisions for new projects were also submitted in 2022. “These are remarkable investments for the future. This will help ensure that Norway can continue to be a reliable supplier of energy to Europe”, says Director General, Torgeir Stordal. Mr Stordal notes that this is good news for the Norwegian supplier industry, as well as for overall value creation and the welfare and prosperity that flow from the resources on the Shelf. Production is extremely high, and it will continue to grow in the years to come. Gas production is projected to remain at around 2022 levels for the next four to five years.
A total of around 230 million Sm3 of oil equivalent was produced in 2022 – which corresponds to about 4 million barrels per day. This consistent high production level can be attributed to three main factors, the first of which is the high number of producing fields on the Shelf (93). In December, Johan Sverdrup Phase 2 came on stream in the North Sea. Nova has commenced production, Njord in the Norwegian Sea has started up following modification work, and several new fields are projected to start producing in the years to come. And last but not least, older fields are producing longer, and producing more, than previously expected.
A substantial number of decisions were made in 2022 regarding new developments that can help maintain this production. The authorities received thirteen plans for new developments (PDOs), as well as several plans for projects aimed at increasing recovery near existing fields, or extending field lifetimes. Decisions have also been made to approve major investments on existing fields. According to figures provided by the licensees, this entails total investments of around USD 30 billion and an overall present value of USD 20 billion. Together this amounts to a growth in reserves of 252 million Sm3 of oil equivalent, half of which is gas. “It’s great that the industry is investing and making a commitment to developing the resources on the Norwegian shelf. Now we’ll expect the industry to demonstrate that it can implement these projects according to the plans, and thus provide a foundation for robust value creation and good resource management,” says Mr Stordal. The largest new project is Yggdrasil (previously called Noaka) in the North Sea, where investments are projected to reach USD 11.5 billion. This development will help promote the establishment of new infrastructure on the Shelf. “Good area solutions are incredibly important for the further development of the Norwegian shelf. Even small discoveries can become quite profitable if they’re tied into existing infrastructure,” adds Mr Stordal.
32 exploration wells were completed last year. They resulted in eleven discoveries, several of which are smaller than expected. That is why resource growth is lower than in the three previous years. “At the same time, it’s gratifying that the companies have shown a willingness to drill exploration wells that carry greater risk when it comes to finding oil or gas. This is typical in parts of the Shelf or the subsurface where no discoveries have been made previously,” elaborates Mr Stordal, who emphasises that the Lupa gas discovery in the Barents Sea, announced in December, is exciting. The NPD expects the Barents Sea to hold significant undiscovered gas resources. A lack of infrastructure to export the gas has meant that the industry has been less eager to explore for gas in this area. More discoveries like Lupa could make development profitable, alongside investments in infrastructure to solve the transport challenge. In January 2022, 53 new production licences were awarded in the Awards in predefined areas (APA) 2021, and there was also substantial interest in APA 2022, where the application deadline was in September.
Advances were made in carbon capture and storage last year. Longship will become a reality. Meanwhile, two injection wells were completed in the Northern Lights project, and good progress has been made in organising the terminal facility in Øygarden in Vestland county. Construction of the world’s largest CO2 transport ship is also under way. There is growing interest in acreage for injection and storage of CO2. In 2022, the authorities awarded three exploration licences for storage of CO2, one in the Barents Sea and two in the North Sea. The initial objective of these licences is to determine whether these areas are suitable for CO2 storage.
Options are being explored as regards potential profitable mineral activity on the seabed on the Norwegian shelf. The objective here is to determine whether this could help secure a future supply of important metals in the transition to a low-emission society. Once again in 2022, substantial efforts were undertaken to enhance the basis of knowledge regarding seabed minerals. The NPD has analysed data collected from its own and other scientific surveys over a decade. This knowledge has led to a resource assessment. The NPD has assisted the Ministry of Petroleum and Energy with an impact assessment in connection with the opening process for exploration for and production of seabed minerals. The impact assessment is currently available for public consultation.
Mr Stordal wants to emphasise that significant resources remain in place on the Shelf, both in fields, in discoveries and in potential discoveries. “The companies must continue to develop the fields, in part by drilling more development wells. They must mature more of the discoveries in their portfolios, and they must also approve decisions to develop more of them. Moreover, they should continue to explore for new oil and gas resources. This is the only secure pathway to make Norway a reliable, long-term supplier of energy to Europe.”
Photo courtesy of Arne Bjørøen/OD.