Upward adjusted estimates for oil investments in 2021

The estimate for 2020 is 1.1 per cent lower than the estimate given in the previous quarter. Furthermore, the 2020 estimate is approximately at the same level as the corresponding estimate for 2019, given in the 4th quarter of 2019.

The estimate for 2021 is 9 per cent lower than the corresponding estimate for 2020 given in the 4th quarter of 2019. The previous survey suggested a decline of 14.6 per cent. Lower decline is indicated now because the estimate for 2020 in corresponding measurements last year increased less than the estimate for 2021 now.

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.

Strong increase in the estimates for field development in 2021

The investments in field development for 2021 are estimated at NOK 63.3 billion. This is 27 per cent higher than the estimate given in the previous survey. The higher estimate is mainly due to significant higher reported cost estimates on some development projects. These increased costs will probably not contribute to expanded production capacity more than initially planned. The increased estimate is also partly due to the fact that some development activity initially planned for 2020 now is postponed to 2021. In addition, the increased estimate is due to the fact that some investments that were previously planned to be made in 2022 have now been accelerated to 2021. The temporary changes in the petroleum tax system adopted by the Parliament in June this year makes it particularly favorable for tax holders on the Norwegian shelf to make investments in the years 2020 and 2021. Accelerated investment plans from 2022 to 2021 may be related to this. In addition, a new plan for development and operation (PDO) is submitted for another development project. This project is now included in this survey.

PDOs are expected to be delivered on a few projects in 2021. These developments are all relatively small. In addition, when development projects usually have the lowest investments in the first year of development, there is reason to believe that these projects will have modest accumulated investments in 2021.

The estimate for the main category exploration and concept studies has increased by 20 per cent to NOK 24.4 billion from the previous survey. Most of this increase can be attributed to the subcategories field evaluation and concept studies. The estimates also indicate strong growth from 2020 to 2021 in these subcategories. These cost types cover activities related to evaluation and development planning of oil and gas discoveries. The strong growth in these cost types reflects that several operators have plans to deliver PDOs on large parts of the existing discovery portfolio on the Norwegian shelf during 2022. The accumulation of planned PDOs in 2022 may be related to the tax package mentioned above. In addition to the fact that the package provides favorable taxation for all types of investments in 2020 and 2021, all development investments on which the PDO is submitted before the end of 2022 will be covered by the same favorable tax rules.

Although the estimate for investments in pipeline transportation and oil and gas extraction has increased significantly, the stated accumulated amount for 2021 is still 9 per cent lower than the corresponding estimate for 2020. As Figure 3 below shows, the estimates for the investment areas field development and exploration and concept studies contribute to the investment decline as indicated for 2021.

Flat development in investments in 2020

The investments in oil and gas extraction and pipeline transport for 2020 are estimated at NOK 182.5 billion. This is 1.1 per cent lower than estimated in the previous quarter. The downward adjusted estimate is mainly due to lower stated figures in field development.

The new estimate for 2020 is 0.2 per cent lower than the corresponding measurement for 2019 given in the 4th quarter of 2019. In the previous survey, a growth of 1.6 per cent was indicated in 2020. On the one hand, the categories field development and exploration pull in the direction of lower investments this year, while this is almost offset by higher investments in the fields of operating and shutdown and removal.

Lower investment in 3rd quarter

The accrued investments fell by 3.8 per cent to NOK 43.3 billion from the second quarter to the third quarter. The seasonally adjusted fall from the second to the third quarter was 2.6 per cent. The accrued investments in the third quarter ended as much as 12.1 per cent lower than in the estimate given for the third quarter in the previous survey. Several operators point to corona measures at shipyards and rigs as the reason why investment activity in the third quarter was significantly lower than they had planned.

The accrued investments in the first three quarters in 2020 summed up to NOK 132.5 billion. Realization of the current estimate for 2020 assumes investments of NOK 50 billion in the 4th quarter, which is 15.5 per cent higher than the accrued investments in the 3rd quarter. Historical figures show that accrued investments are usually highest in the 4th quarter. In the last 21 years, the projections for the fourth quarter of the investment year on average have been 2,2 per cent higher than final investments. The introduction of stricter corona measures now in the fourth quarter increases the probability that a larger than usual share of the investments included in the plans for the fourth quarter will be postponed to 2021.