Norway Logs 30.9 Percent Sequential Fall in Monthly Gas Production

Norway produced 241.3 million cubic meters (8.5 billion cubic feet) per day of natural gas in September, 30.9 percent lower than the prior month but 19.9 percent higher than the same period last year, official data has shown.

The Nordic country’s monthly gas output in 2024 has grown consistently year-on-year, according to data from the Norwegian Offshore Directorate. Norway, a key gas supplier for Europe, sold 7.2 billion cubic meters (254.3 billion cubic feet) September, down by 3.6 billion cubic meters (127.1 billion cubic feet) from August. It produced 1.6 million barrels a day (MMbd) of oil September, down by 10.6 percent against the prior month and 5.1 percent against the same period 2023, though September’s oil production beat the official forecast by 1.5 percent.

Norway averaged 110,000 barrels per day in natural gas liquids production and 19,000 barrels per day in condensate production September.

According to the latest quarterly gas market report of the European Commission, Norway remained the European Union’s biggest source of pipeline gas in the first quarter of 2024, accounting for 54 percent or 22 billion cubic meters (776.9 billion cubic feet). Norway’s overall share of EU gas imports, including liquefied natural gas, in the first three months of 2024 was 34 percent, ahead of the United States (20 percent) and Russia (19 percent).

Norway has overtaken Russia as the EU’s top gas supplier since the latter half of 2022, months after Russia invaded Ukraine, according to Commission data.

Sanctioning Boom

There was a sanctioning boom in Norway amid the shortage of fossil fuels in Europe following the war, according to an analysis by Rystad Energy published January 2023.

“When implemented in June 2020, Norway’s temporary tax relief system sparked an all-time high in project sanctioning on the NCS – with a whopping 29 projects having their development plans (PDOs) delivered between June 2020 and the end of 2022”, Rystad Energy said in a new analysis released August 2024. “The portfolio comprises key schemes like Aker BP’s Yggdrasil hub and Valhall PWP-Fenris development, alongside a vast portfolio of smaller-scale subsea tiebacks”. Norway implemented a petroleum tax reform in 2020 to help encourage investment amid the coronavirus pandemic.

Rystad projected offshore oil and gas investments in Norway in 2024 to grow 17 percent year-on-year to a record NOK 254 billion ($23.2 billion). That would put the NCS ahead of established offshore regions including Brazil and the Gulf of Mexico, according to Rystad. “Notably, 38 percent of this year’s expenditure (NOK 98 billion) is projected to stem from the temporary tax relief system, illustrating the regime’s powerful impact”, it said.

Rystad upstream analyst Mathias Schioldborg said, “Spending will remain elevated as the sanctioned projects are built out, with only a slight decline expected to NOK 253 billion [23.1 billion] in 2026 and NOK 246 billion [$22.5 billion] in 2027”. After 2027, the decline is expected to become steeper depending on “currency movements, short-term sanctioning levels, industry policies set by Norway’s government and how the European demand outlook develops”, Rystad said.

Accelerated Production Decline

However, according to the nation’s upstream regulator, the expected downward course of Norway’s oil and gas production may begin as early as next year.

Norway holds about 7.1 billion cubic meters of oil equivalent (Bcmoe) — 250.7 billion cubic feet of oil equivalent (Bcfoe) — remaining resources in its continental shelf. That includes 3.5 Bcmoe (123.6 Bcfoe) of undiscovered resources, the Norwegian Offshore Directorate, which oversees energy development in the country’s waters, said in its annual Resource Report released August.

The regulator outlined three scenarios on the fate of Norway’s hydrocarbon industry from 2025 to 2050, all of which see a decline in production and all in line with the Paris climate pact according to the Directorate. What scenario will play out depends on Norway’s ability to sustain investment vis-a-vis the price and demand landscape, the amount of new exploration activity and the pace of development solutions including technology needed to access difficult frontiers, according to the report.

In the “base scenario”, liquids and gas production rises to 243 million cubic meters of oil equivalent (MMcmoe), or 8.5 Bcfoe, in 2025 then gradually falls to about 83 MMcmoe (2.9 Bcfoe) in 2050, or by about two-thirds. This would be driven by a decline in larger fields.

“Exploration activity will remain at the current level over the next few years and will then decline”, the Directorate said of the base scenario. Here, the North Sea and the Norwegian Sea drive exploration as companies are encouraged by existing infrastructure in these areas, which shorten lead times from discovery to production and lessen costs.

However, in the scenario, discoveries in these familiar areas are “consistently small”.

Nonetheless, “The petroleum sector will account for substantial value creation over the next 25 years and will remain important for government revenues”.

In the “low scenario”, production starts decreasing from 2025 to nearly zero come 2050. Exploration also stagnates after staying at the current level in the next few years. Wells drilled in the Barents Sea turn up dry or yield small discoveries. Companies therefore stay in the North Sea and the Norwegian Sea, where existing facilities incentivize further exploration. Nonetheless, discoveries in these parts under the low scenario are small too.

“Unit costs on fields will rise rapidly, as new discoveries through exploration will not contribute to substantially increased production on host fields… This will lead to many fields shutting down early”, the Directorate said. In practice, the low scenario translates to “a complete dismantling of the petroleum industry leading up to 2050”, it said.

However, the agency added that “despite the substantial drop in production, this scenario will contribute to significant value creation over the next 25 years”.

In the “high scenario”, production stays at a “high level” over the next decade before gradually falling to 120 MMcmoe (4.2 Bcmoe) in 2050. “The NCS [Norwegian continental shelf] is an attractive petroleum province, and the authorities and the industry both help maintain exploration activity, technology development and profitable petroleum production”, the Directorate said.

Not only areas close to infrastructure but also frontier ones see “high exploration activity”. The industry comes up with new technology to penetrate tight reservoirs and the Barents Sea yields major gas discoveries, encouraging further exploration. The Directorate called for a new pipeline to support increased gas production in the Barents Sea.

Still ‘Competitive’

What the Directorate assured is that Norway’s waters remain a “competitive” oil and gas region thanks to vast remaining resources, developed infrastructure and supportive government policies. Also helping Norway’s cause is Europe’s energy shift away from Russia, as well as the need of economies across the globe for fossil fuels even beyond 2050, according to the Directorate.

Source: rigzone.com