North Sea Oil and Gas Blooms

The North Sea oil and gas industry is blooming.

That’s according to a recent news release from Rystad Energy, which noted that Norway and the UK have overcome recent challenges and are on course to achieve significant milestones “due to notable increases in investments, exploration success, and production”.

“Solid oil and gas production from the region is also providing indispensable resources to Europe and the rest of the world navigating through the energy transition,” Rystad said in the release.

Investments in Norway’s oil and gas industry are expected to reach a record-high of about NOK 225 billion ($21 billion) this year, according to the release, which said this comes as several key projects have been approved in recent years, “driven by the country’s temporary tax regime, which was introduced to incentivize spending on the Norwegian continental shelf”.

The release stated that total investments in the Norwegian oil and gas industry are projected to surpass the record set in 2013, “when total investments reached about NOK 205 billion ($19 billion)”.

“This increase in investment is a positive development after several lean years in the industry and will be particularly welcomed by the oilfield service sector,” Rystad Energy Vice President Emil Varre Sandoy said in the release.

“This investment in the sector is essential for maintaining a strong service industry while it undergoes a gradual transition towards alternative energy sources,” Sandoy added.

Norway Production, Exploration

In the release, Rystad highlighted that Norwegian oil and gas production is set to rise again, “despite a decline of almost 15 percent, from a peak of nearly 4.6 million barrels of oil equivalent per day in 2004”.

By 2025, production might rise back towards peak levels as a result of increased focus on gas production and new projects in the pipeline, Rystad noted in the release, adding that these volumes will be produced with one of the world’s lowest CO2 footprints and reduce Europe’s dependency on Russian hydrocarbons.

The number of exploration wells in Norway is expected to reach 35 this year and grow to 36 in 2024, Rystad highlighted in the release. In 2014, Norway saw 57 new oil and gas exploration wells and in 2016, this count fell to 27, Rystad pointed out. Activity increased in 2018 and 2019, before falling again in 2020 due to Covid-19 and low oil prices, the company noted.

UK Investments, Project Sanctions

Oil and gas investments in the UK have not recovered in the same way as in Norway, Rystad revealed in the release.

“It is expected that 2023 investments will be around 75 percent lower than 2013, when investment peaked at nearly GBP 18 billion ($22.7 billion),” the company said.

Rystad added, however, that, “with many developments in the pipeline”, the region “could see the highest number of projects sanctioned in a decade” in 2024.

“While three to five projects are sanctioned, on average, in the UK each year, 2024 could see up to 14 new oil and gas fields given the green light,” Rystad said in the release.

The three largest projects are Rosebank, Cambo, and Clair Phase 3, Rystad’s Senior Upstream Analyst Sonya Boodoo noted in the release, adding that, “if these major projects get approved, 2024 could mark the highest sanctioning activity since 2013, with around GBP 9.5 billion ($12 billion) in future investments”.

Rosebank is expected to produce 300 million barrels of oil in its lifetime, according to Equinor’s website, which highlights that the company acquired operatorship of the asset in 2019. Ithaca Energy, which holds a 70 percent operated interest in Cambo, notes on its site that the field is expected to produce less than half of the amount of CO2 for each barrel produced than the average UK field.

With an estimated seven billion barrels of oil in place, the Clair field is the largest oilfield on the UK Continental Shelf, BP states on its site. Production from the Clair field began in 2005 through the Clair Phase One platform, BP’s site highlights, adding that Clair Ridge is the second phase of development.  

Offshore Growth

In a release posted on its website back in March, Rystad said the offshore oil and gas sector is set for the highest growth in a decade in the next two years, “with $214 billion of new project investments lined up”.

“Rystad Energy research shows that annual greenfield capital expenditure broke the $100 billion threshold in 2022 and will break it again in 2023 – the first breach for two straight years since 2012 and 2013,” Rystad added.

In that release, Rystad revealed that “one of the leading global drivers is the sizable expansion of offshore activities in the Middle East”.

“For the first time, offshore upstream spending in the region will surpass all others, lifted by mammoth projects in Saudi Arabia, Qatar, and the UAE,” the company said in the release.

“Although the Middle East is leading the way, South America, the UK, and Brazil are just slightly behind. Investments in the North Sea from the UK and Norway will rise in the next two years,” Rystad added.

The company noted in this release that UK offshore spending is set to jump 30 percent this year to $7 billion, “while Norwegian investments will hit $21.4 billion, an increase of 22 percent over 2022”.

Sanctioning Boom

In a separate release posted on its site back in January, Rystad noted that “the energy crisis in Europe triggered by the ongoing war between Russia and Ukraine has left the continent short of hydrocarbon supplies and increasingly reliant on liquefied natural gas imports”.

“Norway, the largest oil and gas producer in the region, has stepped up with a record-breaking sanctioning boom on the Norwegian Continental Shelf that has seen a staggering 35 projects greenlighted in the last two and a half years – most at the tail-end of last year,” Rystad stated in that release.

“According to Rystad Energy research, Norway will see development spending skyrocket in the short-term as the buildout of the project portfolio is estimated to launch a whopping $42.7 billion of greenfield investments,” the company added.

Rystad said these projects, “sanctioned under Norway’s temporary tax regime”, will help maintain high gas production on the Norwegian Continental Shelf towards 2030.

“While key producing fields such as Troll, Oseberg and Aasta Hansteen will slowly enter the decline phase in the coming years, tax regime projects such as Aker BP’s Yggdrasil Hub (start-up in 2027), Shell’s Phase 3 of Ormen Lange (start-up in 2025) and Equinor’s Irpa (start-up in 2026) will be particularly significant in maintaining a steady high flow of gas from Norway to Europe,” Rystad said in the release.

To contact the author, email andreas.exarheas@rigzone.com