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Lloyds List: Oil in Norway slumps as gas output grows

Production plummets by 10% because of field shutdowns and delayed company drilling plans, writes Martyn Wingrove
NORWEGIAN oil production is well into decline after a disappointing year for one of the world's top exporters, but gas output is climbing consistently.
Field shutdowns, late arrival of developments and lack of drilling rigs meant oil production from the Norwegian continental shelf was down 10% last year.
Figures from the Norwegian Petroleum Directorate showed oil production fell to 148.4m cu m, or 2.45m barrels per day, in 2005, compared with 162.8m cu m the year before.
The NPD blamed the loss of production from the large Snorre field in the northern North Sea early in the year, plus late start-up of the Kristin field in the Norwegian Sea for the lower than expected output levels.
There were also delays to oil company drilling plans as a result of the shortage of rigs and strikes by offshore workers.
The government directorate expects oil production to fall again this year to 141m cu m, or 2.4m bpd, its lowest since the mid 1990s due to the lack of fresh oil developments.
Its medium term prediction is output rising a little in 2007 and remaining at 152m cu m until 2009, while production of natural gas liquids and condensates will continue rising to 2010.
'Stable oil production is expected in the period 2006-2010. It is estimated that a total of 735m cu m will be produced, which is 100m cu m less than the previous five-year period,' said the NPD in its latest report.
The slowing stream of new field developments is a big problem for the Norwegian government, which relies heavily on taxes and export revenues.
Last year saw the start of just two fields with hydrocarbon liquids, Kristin and Urd, both in the Norwegian Sea.
This year could see the start of Enoch and Blane, both lying across the UK boundary and operated by Paladin Resources, being gobbled up by Canadian independent Talisman Energy.
The lack of new projects means the NPD expects 97% of the oil produced to 2010 will come from maturing fields already on line now.
Although there were delays to operations, investment on the NCS grew to NKr83bn ($12.36bn) last year, NKr16bn more than the year before.
A large slice of this investment went on two gas projects, which are not due on stream until next year, including Norsk Hydro' Shell's Ormen Lange and Langeled pipelines, plus Statoil's Snohvit development in the Barents Sea.
The NPD forecasts a similar level of investment in projects this year, around NKr81bn, with more of this going into existing fields improved recovery programmes.
Last year the Ministry of Energy and Petroleum received 16 plans for development and operation for oil and gas projects on the NCS. It anticipates receiving another 10 PDOs for new projects this year, including several amended development plans for existing fields.
The slowdown in drilling activity in recent years has left operators with fewer projects to undertake so investment levels will be falling over the next five years to around NKr63bn in 2010.
Completion of Ormen Lange, Langeled and Snohvit projects will also mean expenditure levels will return to levels last seen in the 1990s.
The directorate forecasts total capital investment of NKr366bn for the five years to 2010, 43% of this in production wells, 19% for modifications to existing platforms, 20% to the construction of new offshore infrastructure and 18% for pipeline and land facilities.
Norwegian drillers had plenty of success last year from a record low number of drilled exploratory wells, but most of the discoveries were outside the frontier areas.
Twelve exploration wells were spudded in Norway last year, nine were wildcats and three were appraisal wells. This activity resulted in six discoveries, three in the North Sea and the rest in the Norwegian Sea.
'The results are considered good with discoveries in new areas and discoveries in new plays in mature areas,' said the NPD in its latest report.
Hydrocarbon volumes discovered made up half of the oil and gas produced in Norway in 2005.
'The resource growth from exploration activities is in the range of 3-16m cu m of oil and 39-119bn cu m of gas,' said the state directorate.
'Compared with 2004, this constitutes an increase in resource growth.'
Norsk Hydro was the most successful of the Norwegian drillers, bagging four discoveries including its Stetind gas discovery in the Norwegian Sea.
This opens up the area for finding more gas resources that could eventually be linked to existing infrastructure such as the Asgard export pipeline.
The Oslo-listed group also found one gas and two oil fields in the North Sea last year with its Astero, Peon and Oseberg J wells.
Astero lies north of the Troll oil field, where two production semi-submersibles could act as hubs for any satellite development.
The Peon well was interesting for the NPD and Hydro as it was the shallowest reservoir found to be potentially commercial and it opens up a new exploration play in the North Sea.
State oil firm Statoil also made a Norwegian Sea gas discovery with wildcat well 6302'6-1, although it is thought to be small at present.
Norske Shell perhaps found the largest field last year with the Oryx discovery in the Norwegian Sea.
It found up to 50bn cu m of gas with the wildcat well 6406'9-1 and is likely to follow this up with an appraisal well this year.
The NPD figures do not take into account Eni's recent discovery of more oil at the Goliat field with an appraisal well in the Barents Sea.
The Italian oil company now has around 250m barrels of recoverable oil and gas resources in Goliat after drilling well 7122'7-3 with Ocean Rig's semi-submersible Eirik Raude this month.
Oil companies have new opportunities for exploring for hydrocarbon resources this year and into 2007 following the award of licences in two rounds, both successful in attracting new players.
The pre-defined acreage licence round known as APA 2005 resulted in the award of 45 production licences to 26 companies in areas around existing infrastructure.
The energy ministry's 19th licensing round, covering frontier areas of the Norwegian and Barents Seas, led to applications for new acreage from 24 companies, with the award of blocks expected in March this year.
With drillers having a 50% success rate in Norway we can look forward to a raft of new discoveries and potential new projects this year.

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