Upward adjusted estimates for oil investments in 2019

The upward adjustment of the estimates for 2019 is driven by an increase in the estimates for field development and fields on stream. Within the former, two new plans for development and operations (PDOs) have been submitted. These two development projects were not included in the estimates given in the previous quarter.

The oil companies’ latest estimates for 2019 suggest an increase of as much as 17 per cent compared with the corresponding figure for 2018, according to new figures from Investments in oil and gas, manufacturing, mining and electricity supply. This growth is considerably higher than indicated in the previous survey, which showed a 7.9 per cent increase. The higher increase indicated now is mainly due to the upward adjustment of the 2019 estimates. In addition, in the corresponding surveys last year, the 2018 estimates were revised downwards from the first to second quarter (see figure 2).

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.

Field development leads to strong investment growth in 2019

The investments in oil and gas extraction and pipeline transport for 2019 are now estimated at NOK 183.8 billion. This represents a strong increase of 17 per cent compared with the corresponding figure for 2018. Strong investment forecasts within the categories field development and fields on stream lead to this rise. The growth in field development is related to the fact that several PDOs were submitted in 2017 and 2018. These projects are expected to have high investment levels in the current year. In addition, the estimates for exploration, and for shutdown and removal also indicate growth in these categories in 2019. Pipeline transportation, on other hand, shows a decrease and dampens the overall growth.

Investment increase indicated for 2020

The newest investment forecast for oil and gas extraction and pipeline transport for 2020 is estimated at NOK 172.4 billion. This is 11 per cent higher than the corresponding estimate for 2019 given in the 2nd quarter of 2018. The increase is mainly due to a high investment growth within the category fields on stream. The strong growth which is indicated for 2020 within fields on stream should be interpreted with some caution. The 2019 estimate which is used as a basis for comparison is extraordinary low, and is 26 per cent lower than the latest 2019 estimate given in this quarter. It is unlikely that the 2020 estimate for fields on stream will have the same upward adjustment as the 2019 estimate in the coming surveys. This suggests that the total investment growth that is indicated for 2020 might be overstated, since it is mainly driven by the investment growth within fields on stream.

The estimate for field development in 2020 amounts now to NOK 59.9 billion. This is 2.2 per cent lower than the corresponding figure for 2019 given in the 2nd quarter for 2018. In the 3rd quarter last year, two large PDOs were submitted to the government. Hence, these projects were not included in the 2019 estimate for field development given in the 2nd quarter of 2018, which is the basis of comparison for the latest 2020 estimate. The estimate for field development in 2019 has grown significantly in the later surveys. This might suggest that the decrease in field development that is indicated in this survey, might be somewhat understated. On the other hand, several new PDOs are expected to be submitted both in the 2nd half of 2019 and in 2020. This will increase the investment in 2020 for field development compared to the current estimate.

High exploration estimates for 2020

The latest investment estimates for exploration are expected to amount to NOK 37.2 billion in 2020. This is 12 per cent higher than the corresponding estimate for 2019 given in the 2nd quarter of 2018. The exploration estimates given in the 2nd quarter are based on the operators’ preliminary licence budgets. During the autumn and early winter, these preliminary licence budgets will be considered in relation to the oil companies’ scope for investment. The final budgets are normally lower than the preliminary budgets. The extent of the deviation between the preliminary budgets and the final budgets depends on oil price expectation and rig availability. Oil price expectations partly reflect the will to invest in exploration, while rig availability reflects the ability to carry out desired exploration activity. Oil price expectation is influenced by the development in the oil prices. Both the positive development in the oil prices in the last half year and the abundant rig availability indicate a lower relative deviation between the preliminary budgets and the final budgets than in a normal year. Because of the high estimate for 2019, there is still reason to believe that some of the exploration planned for 2019 will be postponed.

Minor changes from Q4 2018 to Q1 2019

The final investments in the 1st quarter of 2019 amounted to NOK 38.2 billion. This is 12 per cent lower than estimated in the previous quarter and compared to the final investments in the 4th quarter, unadjusted. The seasonally adjusted figures show that the investment level was more or less unchanged from the 4th quarter of 2018 to the 1st quarter of 2019.

However, final investments in the 1st quarter of 2019 are 22 per cent higher than the final investments in the 1st quarter of 2018.