Record high investments in 1998

According to the investment survey conducted in the first quarter of this year, 1998 investments in the oil and gas extraction and pipeline transport sectors totalled a record NOK 79.2 billion. This is the highest figure ever recorded for petroleum investments, and is fully NOK 16.7 billion higher than in 1997. Extremely high investments in field development were the main contributor to the upturn, in addition to the high level of activity in fields on stream and terminals.

From last year's fourth quarter estimate for 1998 to the final figures from this year's first quarter investment survey, the figure for the overall investments in the oil and gas extraction and pipeline transport sectors was revised upward by NOK 1.8 billion. In previous years, the final figures recorded in the first quarter of the year after the investment period have basically been somewhat lower than the estimate made in the fourth quarter of the investment year. The upward adjustment of the 1998 figure is because the field development investments in fourth quarter 1998 were all of NOK 2.4 billion higher than estimated in fourth quarter last year. The Åsgard, Visund, Eldfisk and Troll C fields were the main contributors here.

Extremely high field development costs

Investments in field development in 1998 totalled NOK 45.1 billion. This is the highest figure ever recorded for field development and is NOK 9.9 billion higher than in 1997. Since the survey conducted in May last year, the estimate has been revised upwards by NOK 6.6. billion. Gullfaks satellites phase II is the only development project that has been approved by the authorities since May last year. This project was first included in the investment survey in the third quarter of last year and accounted for small investments in 1998. The upward revision of the estimate has thus taken place in fields in which development has taken place over a longer period of time. Projects such as Åsgard, Visund, Ekofisk II, Eldfisk, Balder and Troll C have contributed the most to the upward revision. With the exception of Ekofisk, substantial cost overruns have been reported at these fields over the course of the projects' combined development period.

Exploration investments totalled NOK 7.6 billion last year. This is NOK 0.7 billion lower than in 1997, when exploration investments reached their highest level so far. The final figure for exploration investments in 1998 was NOK 2.3 billion lower than indicated in the first quarter 1998 estimate. Because of the low price of oil, several companies have not gone through with all the exploration programmes they had planned.

Investments in fields on stream in 1998 amounted to NOK 12.4 billion, the highest figure ever recorded. Investments in onshore activities and pipeline transport last year came to NOK 5.7 and 8.4 billion respectively. Pipeline investments were thus about the same as in 1997. Onshore investments were NOK 4.2 billion higher in 1998 than the year before, mainly because of the construction of new facilities at Kårstø. Cost overruns were also reported here and this is reflected in the investment surveys carried out in 1998, which show a steady upward revision of the estimates from 1998 until the final figure recorded in the first quarter of this year.

Investments will be cut back this year

In the first quarter of this year, the estimate for the overall petroleum investments in 1999 was NOK 62.1 billion, down NOK 2.2 billion from the estimate for 1999 in the previous survey. The number is, however, NOK 8.8 billion lower than the corresponding estimate for 1998, obtained in first quarter 1998. The 1999 estimate is not expected to increase in the next surveys like the 1998 estimate did. With a continued low oil price in 1999 the companies will probably not initiate new field and pipeline developments, and it is also conceivable that investment spending on commenced projects will be cut.

Exploration investments in 1999 are now estimated at NOK 5.2 billion, down a whole NOK 2.1 billion from the previous survey. The main reason is the extremely low price of oil, and it is conceivable that the companies will make further cuts in exploration investments in subsequent surveys this year if the situation persists.

In the survey conducted in the first quarter of this year, 1999 investments in field development are estimated at NOK 32.3 billion. This is NOK 3.5 billion lower than the estimate for 1998 from the first quarter of last year. It is most unlikely that the 1999 estimates for field development will show similar upward adjustments as the field development estimates for 1998 have done, and the investments in field development this year will probably be lower than last year. 1999 investments in fields on stream are estimated at a record high NOK 16.8 billion, of which the plan is to use NOK 10.8 billion for production drilling. Downward adjustments in the investment budgets for fields on stream are conceivable for 1999 if the low oil price persists. The estimates for investments in land-based facilities and pipeline systems for this year are NOK 3.2 and 4.6 billion respectively. This is NOK 1.3 and 3.4 billion lower than the similar estimates for 1998. The sharp downturn in pipeline investments is due to reduced investments in Europipe II and the Åsgard transport system.

New Statistics
Investment statistics. Oil activities, 1st quarter 1999.
The statistics are published quarterly in the Weekly Bulletin of Statistics and Official Statistics of Norway (NOS) Oil and Gas Activity. For more information contact: Nils.Anders.Nordlien@ssb.no, tel. +47 21 09 47 44, or Lise.Dalen@ssb.no, tel. +47 21 09 47 68.

Weekly Bulletin issue no. 9, 1999