Oil investment estimate for 2021 upward adjusted

The upward adjustment for 2021 is driven by higher estimates within the categories of fields on stream and field development. Among other things, two new plans for development and operation (PDO) have been submitted. These two projects were not included in the estimates given in the previous quarter. 

The estimate for 2021 in the statistics oil and gas, manufacturing, mining and quarrying and electricity supply now indicate a small growth of 0.9 per cent from the previous year. In the previous investment survey, the estimates for 2021 showed a fall of 6.4 per cent compared with the corresponding estimates for 2020 given in the first quarter of last year. The change from indications of a clear fall to a small growth in 2021 is mainly due to the upward adjustment of the estimate for 2021. In addition, the estimate for 2020 given in similar measurements last year was downgraded as a result of the oil companies cutting their exploration budgets significantly in the wake of the sharp fall in oil prices in the spring of last year.

Quarterly investment statistics for oil and gas extraction and pipeline transport are included in the survey Investments in oil and gas, manufacturing, mining and electricity supply. For more details about total investments, please see the following article.

Slightly higher investment estimate for 2022

The investments in oil and gas extraction and pipeline transport for 2022 are estimated at NOK 142.8 billion. The estimate is 3.1 per cent higher than the figure stated in the initial estimate for 2022 from the previous survey in February.

The estimate for 2022 is 1.9 per cent lower than the corresponding estimate for 2021, given in the second quarter of 2020. This is a clearly lower fall than indicated in the previous survey. Then the estimates for 2022 showed a fall of 8.9 percent. The lower fall that is now indicated is due to an upward adjustment of the estimate for 2022 now from the previous survey and a downward adjustment in the estimate given for 2021 in similar measurements last year. As Figure 2 above shows, the estimate for 2021 has increased significantly in later surveys. The estimate for 2022 must therefore increase correspondingly to maintain the decline of 1.9 per cent, which is now indicated.

It is especially the estimates for field development that contribute to the indicated decline for 2022. The estimate for this category is 10 per cent lower than the corresponding estimate for 2021. The decline is related to more developments being 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.

Field developments are only included in the survey when a plan for development and operation (PDO) is submitted to the authorities. It is expected that the PDO will be submitted on some projects this year. Among these are Frosk, Kobra øst / Gekko and Tommeliten Alpha. These will have significant investments for next year and will be included in future surveys as the PDOs are submitted to the Authorities. It is further expected that PDOs will be submitted for a very high number of projects next year. This has to do with the fact that the Parliaments tax measures package, which was adopted in June last year, provides favorable taxation for all development investments for which the PDO is submitted before 1 January 2023. Investments in projects tend to be modest in the first development year. The vast majority of these projects are planned to start up late next year and will therefore each have low investments made in 2022. However, since the planned PDOs are so many, the accumulated investments from these in 2022 could still be significant.

Estimate for 2021 upward adjusted

Total investments in oil and gas activity in 2021, including pipeline transportation, are estimated at NOK 181.8 billion. This is 4.8 per cent higher than estimated in the previous quarter. It is especially increased estimates for fields on stream that contribute to the upward adjustment.

From the survey in the second quarter of 2020 to this survey, the estimate for 2021 has increased by as much as 25 percent. The last time a similar increase in estimates was seen was for the year 2012. The increase at that time was mainly driven by the delivery of PDOs for several large and medium-sized development projects, at about the same time. New developments account for only a small part of the increase in estimates for 2021. There have only been a few and relatively small developments since the survey in the second quarter of last year. Some of the increase is due to cost overruns on some field developments. 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. This may be related to the design of the oil tax package. All types of investments, with the exception of shutdown and removal, are covered by the temporary tax rules until the end of 2021. From 2022 onwards, investments included in PDOs that are sanctioned before 2020 will no longer be covered by the favorable tax rules. The increase in estimates for a number of older fields for the year 2021 may be related to the tax impulse being phased out for this type of investment after 2021. The temporary tax rules will nevertheless continue to apply after 2021 and until production starts for investment projects for which a new PDO is submitted before 1 January 2023 and correspondingly for investments related to applications for changes in existing PDOs or investments that are covered by applications for exemption from submitting PDOs.

The estimate for investments in pipe transport and extraction of oil and gas for 2021 is now 0.9 per cent higher than the corresponding estimate for 2020, given in the second quarter of last year. As Figure 4 shows, it is mainly the estimates for the category exploration activities and fields on stream that drive the increase that are indicated from 2020 to 2021, while the category field development, on the other hand, is moving in a negative direction and helping to dampen the stated increase.

Small investment growth in the 1st quarter

Investments in the 1st quarter ended at around NOK 40.9 billion. This is 11.3 per cent lower than what was estimated in the 1st quarter. The investments made are 12.6 per cent lower than in the 4th quarter of 2020. The seasonally adjusted figures, on the other hand, show a slight growth of 0.7 per cent, since investments seasonally tend to be clearly lower in the 1st quarter than in the 4th quarter.