Norway sees small rise in 2021 upstream spend
Norway's national statistics bureau (SSB) revised upwards May 26 its Q1 2021 forecast for total investments in oil and gas activity this year, including pipeline transportation. This is now 181.9bn krone, which is 4.8% more than estimated in the previous quarter.
The revision is due to higher estimates for spending, both on fields on stream and on field development. These include two new plans for development and operation.
The estimate for 2020 was downgraded last year when oil companies cut their exploration budgets significantly in the wake of the sharp fall in oil prices in the spring.
The investments in oil and gas extraction and pipeline transport for next year are estimated at 142.8bn krone. The estimate is 3.1% higher than the figure stated in the initial estimate for 2022 from the previous survey in February.
Estimates for field development for 2022 are 10% lower than the corresponding estimate for 2021 as more developments are to be completed in 2021 or early 2022. On other developments, investments are phased down in 2022 compared to this year. In addition, the categories of fields in operation as well as decommissioning and removal contribute most to the decline indicated for 2022. The projections for exploration activities, on the other hand, indicate a clear increase for next year and clearly contribute to curbing the decline in 2022.
It is expected that PDOs will be submitted on Frosk, Kobra East / Gekko and Tommeliten Alpha. These will have significant investments for next year and will be included in future surveys as the PDOs are submitted.
And the tax measures adopted in June last year will encourage a lot more development work, SSB said. Investments in projects tend to be modest in the first development year and the "vast majority" of these projects are planned to start up late next year, meaning low investments in 2022. "However, since the planned PDOs are so many, the accumulated investments from these in 2022 could still be significant," it said.
From the survey in the second quarter of 2020 to this survey, the estimate for 2021 has increased by as much as a quarter.
There have only been a few and relatively small developments since the Q2 2020 and some of the increase was due to cost overruns upstream. "However, a significant part of the increase can be attributed to higher investment budgets in older fields in operation and the fact that some investments that were previously planned to be completed in 2022 have been accelerated to 2021."
From 2022 onwards, investments included in PDOs that are sanctioned before 2020 will no longer be covered by the favourable tax rules.
Investments in Q1 reached 40.9bn krone, 11.3% lower than what was estimated in Q1 and 12.6% lower than in Q4 2020. The seasonally adjusted figures, on the other hand, show a slight growth of 0.7%, since investments seasonally tend to be clearly lower in Q1 than in Q4 of a year.