Norway Oil Companies Continue to Slash Spending
August 24 2016 - 5:40AM
Dow Jones News
OSLO—Norwegian oil companies say spending on exploration and
production is likely to fall more than previously expected next
year, an official survey showed Wednesday, as they continue to
delay projects and slash investment.
Oil companies operating in Norway, Western Europe's largest oil
exporter, now expect to spend 150.5 billion Norwegian kroner
($18.37 billion) on exploration and production next year, the
weakest figure since 2011 and roughly a third below the sector's
all-time high of 220.7 billion kroner two years ago, Statistics
Norway said.
In a similar survey in May, companies had expected to invest
153.2 billion kroner next year. It is highly unusual for the
companies to lower investment in the third quarter from the second
quarter, the statistics agency said.
The additional spending reduction next year was attributed
mainly to delayed shutdowns and the removal of old production
facilities, the agency said.
Oil companies also lowered expectations for spending in 2016, to
163.5 billion kroner, a 16% drop on the year and 1.5% below a
similar estimate made in May.
Although the Brent oil price has picked up to $49 a barrel from
below $30 a barrel in January, it is still more than 50% cheaper
than two years ago, and major oil companies are delaying projects
to reduce costs.
The oil and gas downturn has dented Norway's growth, as
petroleum activity contributes nearly a fifth of gross domestic
product and nearly 40% of export revenue.
Similar downturns in the past have had a long-term effect on
Norway's oil activity. In 1998, Brent plunged by a third on the
year to an average $12 a barrel, and Norway's oil investments
dropped 32% over two years. Although prices picked up, spending
remained weak and didn't exceed the 1998 peak until 2005, when
Brent traded at an average $49 a barrel.
Today's spending estimates were lower than expected by analysts.
DNB Markets had forecast spending at around 153 billion kroner next
year and said an estimate below 150 billion kroner would be
considered negative for the economy.
Norway's oil sector increased spending by 73% between 2010 and
2014, as high and stable oil prices enabled companies to develop
projects previously seen as unprofitable, but costs also escalated
amid capacity constraints in the global oil-field services
industry.
Norway produced 3.92 million barrels of oil equivalent a day in
2015, up slightly on the year but 14% below the peak a decade
earlier.
Write to Kjetil Malkenes Hovland at
kjetilmalkenes.hovland@wsj.com
(END) Dow Jones Newswires
August 24, 2016 05:25 ET (09:25 GMT)
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