Record high investments in field development this year

In the oil activities investment survey conducted during the fourth quarter of this year, the total investments in field development are estimated at NOK 42.8 billion in 1998, NOK 6.6 billion higher than the corresponding estimate for 1997 obtained during the fourth quarter last year. It therefore looks like field development investments will surpass last year's record level of NOK 35.5 billion.

In the census, the estimate for combined investments in the gas and oil extraction and pipeline transport sectors is now NOK 77.4 billion for 1998. This is an increase of NOK 14.3 billion compared with the similar estimate for 1997. Investments in field development are the major contributor to the increase. Part of the reason for this is that there have been substantial cost overruns on several major projects, including Åsgard, Visund and Troll C.

Low oil prices prompt downward revision

Investments in fields on stream are now estimated at NOK 12.6 billion for 1998. The downward revision of NOK 0.9 billion from the previous census is mainly due to a decline in investments in production drilling. Several drilling programmes have been postponed in the wake of the current low oil prices. The new estimate for investments in fields on stream is, however, NOK 3.1 billion higher than similar figures for 1997. Exploration investments have been revised downwards by NOK 1 billion since the previous census. Several companies say that the low price of oil indicates that investments in exploration programmes must be postponed. Consequently, it appears that the level of exploration investments this year will not reach last year's record of NOK 8.3 billion.

The 1998 investment estimates for onshore activities and pipeline transport are respectively NOK 4.3 and 0.7 billion higher than the estimates for 1997 obtained in the fourth quarter of last year.

Lower investments next year

The estimate for overall petroleum investments in 1999 is, according to submitted reports, NOK 64.5 billion, NOK 1.9 billion lower than the corresponding estimate for 1998 obtained in the fourth quarter of last year. Since then the 1998 estimate has increased sharply, and it is not expected that the estimate for 1999 will show a similar increase in the next censuses. Further developments in the estimate for 1999 are also very highly dependent on the price of oil.

Exploration investments next year are estimated at NOK 7.3 billion, a decline of NOK 2.5 billion compared with the corresponding 1998 estimate. Since the previous census, exploration budgets have been revised downwards by NOK 1.5 billion. The main reason for this is the very low price of oil. Several companies say that the situation first and foremost prompts cutbacks in exploration programmes because exploration investments can be reversed at relatively short notice. Further cutbacks in exploration investments are possible if oil prices remain low throughout next year.

Field development investments are now estimated at NOK 32.8 billion in 1999, a decline of NOK 1.2 billion from the corresponding figure for 1998. The field development estimate for 1998 has increased by NOK 8.8 billion from fourth quarter last year to fourth quarter this year. It is improbable that the field development estimates for 1999 will show a similar upward revision, and the field development investments for next year will probably be lower than this year.

The 1999 estimate for fields on stream is a record high NOK 16.7 billion, with investments in production drilling accounting for NOK 10.8 billion of the total. Several operators on the continental shelf say that investments in production drilling are particularly sensitive to oil prices, and that cutbacks in investment budgets could result if oil prices remain low throughout next year.

The estimates for investments in land-based facilities and pipeline transport systems are estimated at NOK 3.1 and 4.7 billion respectively. These figures are down NOK 0.6 and 2.8 billion compared with corresponding estimates for 1998. The sharp decline in pipeline investments is due inter alia to the completion of Europipe II next year.

Tables

New Statistics
Investment statistics. Oil activities, 4th quarter 1998.
The statistics are published quarterly in the Weekly Bulletin of Statistics and in Official Statistics of Norway Oil and Gas Activity. For more information contact: Jorn.Bugge@ssb.no, tel. +47 21 09 47 67, or Lise.Dalen@ssb.no, tel. +47 21 09 47 68.

Weekly Bulletin issue no. 49, 1998