The Norwegian oil and gas industry has lasted for almost five decades, and the activity has established the petroleum sector as the most important industry in Norway, counting for more than 23% of the total value creation in 2012. The petroleum production on the shelf has added more than NOK 9000 billion to the country’s GDP over the about 40 last years1. The value creation in the sector positions Norway in the top world ranking due to the significant trade surplus2.
Today 76 fields are in production and produced in 2012 about 1,9 mill barrels of oil per day and about 111 bill standard cubic meters (SM3) gas. Norway is ranked as the seventh largest oil exporter and the fourteenth largest oil producer in the world. In 2011 Norway was the third largest gas exporter and the sixth largest gas producer in the world.3
Yesterday Created Today
When they gave their opinion in connection with the UN Geneva conference concerning a law for the oceans in 1958, Norwegian geologists were quite clear that they did not believe that there would be oil or gas on the Norwegian continental shelf. Nevertheless, following a successful survey in Holland, US oil companies got permission to conduct geological surveys in 1962. At this stage Phillips Petroleum applied for exclusive rights to search for oil and gas in the Norwegian continental shelf. Instead Norway, following a declaration of the rights given in the Geneva convention in 1958, formed the Act of 21 June 1963 No. 12, which declared “The right to submarine natural resources is vested in the State” and that “The King may grant Norwegian or foreign persons … to explore or exploit the natural resources.” Following this law Norway divided the continental shelf in blocks and invited companies to apply for licenses.
In 1966 the first rig began drilling activities for Esso, but it was not before 23rd December 1969 that Phillips Petroleum discovered Ekofisk, the largest oil field ever found and in 1971 the first oil was produced. The field also contained gas, which later were piped to the continent.
In 1971 the Norwegian Parliament (Stortinget) prepared principles for the oil and gas industry, later referred to as the “10 oil commandments”4, which formed the basis for the future Norwegian politics on the sector:
- National supervision and control must be ensured for all operations on the Norwegian continental shelf (NCS).
- Petroleum discoveries must be exploited in a way which makes Norway as independent as possible of others for its supplies of crude oil.
- New industry will be developed on the basis of petroleum.
- The development of an oil industry must take necessary account of existing industrial activities and the protection of nature and the environment.
- Flaring of exploitable gas on the NCS must not be accepted except during brief periods of testing.
- Petroleum from the NCS must as a general rule be landed in Norway, except in those cases where socio-political considerations dictate a different solution.
- The state must become involved at all appropriate levels and contribute to a coordination of Norwegian interests in Norway’s petroleum industry as well as the creation of an integrated oil community, which set its sights both nationally and internationally.
- A state oil company will be established which can look after the government’s commercial interests and pursue appropriate collaboration with domestic and foreign oil interests.
- A pattern of activities must be selected north of the 62nd parallel, which reflects the special socio-political conditions prevailing in that part of the country.
- Large Norwegian petroleum discoveries could present new tasks for Norway’s foreign policy.
In 1972 Den norske stats oljeselskap a.s (Statoil), the state-owned oil company, and the industry-regulating organization, the Norwegian Petroleum Directorate (NPD), were established. The latter was later divided into Norwegian Petroleum Directorate and Energy and the Petroleum Safety Authority Norway (PSA). PSA is organized under the Ministry of Labour (NPD under the Ministry of Petroleum and Energy) and has the responsibility for health, safety and working environment on the continental shelf.
In the beginning the state owned 50 per cent in each production license. Later Stortinget decided that this proportion could be increased or reduced in each case.
Statfjord was founded in 1974—one of the world’s largest offshore oil discoveries.
Midgard, part of Åsgard off mid-Norway, was discovered in 1981, and Snøhvit gas field in the Barents Sea was discovered in 1984. [Snøhvit later ranks as the world’s northernmost producing field, and utilizes the longest multiphase flow transport system (unprocessed gas, water and lighter hydrocarbons are sent together through the same pipeline) on the planet.] In this year it was also decided to take a proportion of Statoil’s holdings in a number of fields transferred to a special account—later to become a part of the oil fund.
In 1986 the Sleipner East and Troll field developments were initiated, making it possible for Norway to become one of the most important energy exporters to the European market.
In 1992 the installation of the Haltenpipe gas line between Heidrun and Tjeldbergodden in Mid-Norway (245 km long) was approved and completed in 1996.
In 1997 Ormen Lange was discovered and came on stream in 2007. This field is positioned in deep water, 850 – 1100m, which initiated new development solutions.
Norway has always imposed strict environmental regulations on the petroleum industry; for example, permanent gas flaring was prohibited on the oil fields from the beginning and later Norway introduced carbon tax which made the industry take a number of steps to reduce the greenhouse gas emissions. The Ekofisk Bravo platform had the first uncontrolled blowout in 1977 and this incident initiated strict safety and environmental regulations on the Norwegian continental shelf. The Alexander L Kielland disaster in 1980, which killed 123 people, necessitated steps, which in turn has made Norway into a world leader for safety. 5
What is Going on Today6
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Operators and licensees per June 2013-09-137
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Companies on the NCS in 1990-2012 by company type8
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As mentioned initially the activity on the Norwegian continental shelf has established the petroleum sector as the most important industry in Norway. Oil revenues provided more than a quarter of the total income and together with gas the industry contributed with 86% of the total export in 2012.9 In Norway (with a population of about 5 mill) the industry supports almost 250.000 jobs directly and indirectly. Activity driven by governmental use of oil revenues comes in addition (in 2013 the spend will be almost NOK 124, representing almost one krone in every eight appropriated in the 2013 budget).10
Norway’s overall offshore area covers 2.040.000 square kilometers in which half could contain petroleum. 523.800 square kilometers are opened for petroleum activities. Unopened areas are the coast in the Norwegian Sea and most of the Skagerrak.
Opening processes have been initiated for the Barents Sea South-East and the offshore areas around Jan Mayen. If the first area mentioned is approved, this will be the first new area of the NCS to be opened to petroleum activities since 1994. A series of discoveries has been made in the recent years, and three of the past five years accounted for the largest-ever number of finds on the NCS.11
The largest oil discoveries in the period 2000-2011 were Johan Sverdrup (1761 mill barrels of oil equivalents), Skrugard (241 mill barrels of oil equivalents), Goliat (175 mill barrels of oil equivalents), the Edvard Grieg field (161 mill barrels of oil equivalents), Maria (132 mill barrels of oil equivalents), 34/4-11 (125 mill barrels of oil equivalents), Ringhorne the East field (87 mill barrels of oil equivalents), Draupne (84 mill barrels of oil equivalents), Skuld (67 mill barrels of oil equivalents) and Vilje (64 mill barrels of oil equivalents).12
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The discovery of Johan Sverdrup field, west of Stavanger, in 2010 and 2011 is very big and stretches across three different licenses. Statoil has been appointed the operator and the concept for the development is to be presented within 2013. The field may come on-stream in 2018.13
In 2012 development and operation plans (PDOs) for Skuld, Jette, Åsgard subsea compression, Martin Linge, Edvard Grieg, Bøyla and Svalin were approved.
Further, per 26.04.2013, there are 5 developments decided by the licensees (Gina Krog, Ivar Aasen, Delta, S and Aasta Hansteen) and 25 discoveries in the planning phase, including the Johan Sverdrup field.14
Mobile rigs on the NCS increased in number from 2005, and according to data from the industry an expansion in the rig capacity is expected both globally and on the NCS in the coming years. A number of the rigs, which have arrived on the NCS in recent years, have been specially designed for these operations.15
Norway is one of the world’s cleanest producers of oil and gas and currently meets around 30 percent of gas consumption in a number of European countries, such as France, Germany and the UK. The EU is dependent on Norwegian gas to reach its climate targets.16 According to Intsok’s “Annual Report 2012” more than 100 of their partners worked on issues related to safer and cleaner oil and gas production; and solutions for safer and cleaner offshore production,oil spill contingency and environmental monitoring are the core strength of several firms.
What about Tomorrow?
The new discoveries on the NCS have certainly boosted the level of positivity in the industry, however still there are a number of critical voices to be heard regarding the future.
The level of exploring and production of oil and gas on the NCS in the years to come depends on many factors, including, but not limited to, growth in the energy markets, other energy options, technology changes/efficiencies, geopolitics and OPEC supply/non-OPEC supply.17 Also the Norwegian cost level has been mentioned as worrying and a factor, which has the ability to slow the progression in the Norwegian.18
However, according to Ernst & Young presentation (“The NCS – a bundle of opportunities”, ONS Norway 2013), the key indicators for the Norwegian OFS industry suggest a high level of activity: high investments on the NCS to support production until the 2050-2060s, drilling activity to increase (the number of rigs on the NCS will grow in number from 29 in 2011 to 48 in 2015) and all-time-high global upstream spending expected to increase further.
NPD’s estimates from July 2013 show that only 44% of the recoverable resources on the NCS (Barents Sea South-East and the shelf surrounding Jan Mayen not included) have been produced and according to their report the remaining recoverable resources are expected to bring the nation and companies great value in the future.19
"Our oil and gas saga is far from finished. The outline is clear—we are ready to write new chapters”, a quote from Gro Brækken, Director general, Norwegian Oil and Gas Association, in the report “Vigorous activity and bright prospects. The oil and gas year 2012.”