OSLO, Dec 12 (Reuters) – Norway’s oil and gas sector faces another two years of falling investment as the industry’s downturn lasts longer than expected, a lobby group forecast on Monday.
A 50 percent drop in crude prices to around $57 per barrel since mid-2014 has lead oil firms to tighten spending and postpone or cancel projects.
Investments in 2017 are expected to fall by seven percent to 143 billion Norwegian crowns ($16.93 billion) from 154 billion crowns in 2016 and decline further to 131 billion in 2018, the Norwegian Oil and Gas Association estimated in a report.
In 2015, the oil and gas industry accounted for 15 percent of Norway’s gross domestic product, for around 20 percent of the state’s total revenues and 39 percent of Norwegian exports, according to the country’s oil ministry.
“Last year’s report predicted that 2017 would be a turning point for renewed investment growth. However, a lower level of costs and less optimistic price expectations mean the present view is that capital spending will level off over the next few years,” the Oil and Gas Association said.
A small rebound was forecast for 2019, to 137 billion crowns, due to the development of the giant Johan Sverdrup oilfield in the North Sea, but investments were then seen falling again in 2020 and 2021 to 127 billion and 126 billion respectively.
The forecasts were all measured in inflation-adjusted 2016-level crowns, and based on an oil price forecast of around $50 per barrel, resulting in an average 130 billion crowns annual investment level from 2018-2021.
Should the oil price rise to $70 per barrel, investments after 2018 “could be at around 140 billion crowns per year,” it added.
Following cost-cuts and redesigns, oil companies, including top producer Statoil, have recently presented plans for some oilfield developments and said more may come in 2017.
The industry association saw signs of a tighter market for oil, and expected the balance between supply and demand to shift in 2017, not least thanks to the recent promise of output cuts by OPEC and some non-OPEC countries.
In November of last year the lobby had anticipated that oil and gas investments, as measured in 2015 crowns, would fall to 132 billion in 2017 from 149 billion in 2016 and then pick up from 2018 and onwards.
(Editing by Terje Solsvik and Alexander Smith)
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