Norway Leads Western Europe in Oil Reserves

By MarEx 2014-04-30 19:54:00

According to the Oil & Gas Journal (OGJ), Norway had 5.83 billion barrels of proven crude oil reserves as of January 1, 2014, the largest oil reserves in Western Europe. All of Norway's oil reserves are located offshore on the Norwegian Continental Shelf (NCS), which is divided into three sections: the North Sea, the Norwegian Sea, and the Barents Sea. The bulk of Norway's oil production occurs in the North Sea, with smaller amounts in the Norwegian Sea. New exploration and production activity is occurring in the Barents Sea.

According to Statistics Norway, Norway exported an estimated 1.19 million bbl/d of crude oil in 2013, of which 92 per cent went to European Organization for Economic Cooperation and Development (OECD) countries. The top five importers of Norwegian crude in 2013 were the United Kingdom (42 per cent), the Netherlands (21 per cent), Germany (10 per cent), Sweden (6 per cent), and the United States (5 per cent).

The largest energy company operating in Norway is Statoil, controlling 70 per cent of Norway's oil and gas production. However, according to the US Energy Information Administration (EIA), international oil majors also have a sizable presence in Norway. The Norwegian government's subsidy of oil and gas exploration, introduced in 2005, refunds 78 per cent of the exploration costs to the companies. In addition, taxes from onshore oil activities and from LNG shipped overseas were reduced, which has attracted additional international investment. The Norwegian government is focused on increasing recovery in producing fields, further exploring producing areas, opening new areas to exploration, as well as developing new subsea technology.

EIA estimates that in 2013, Norway produced 1.8 million barrels per day (bbl/d) of petroleum and other liquids. Norway's petroleum production has gradually declined since 2001 as oil fields have matured. The Norwegian Petroleum Directorate (NPD) expects that production will continue to decline slowly over the next few years, and that in the longer term the number and size of new discoveries will be a critical factor in maintaining production levels. The NPD estimates that the three largest producing oil fields in 2013 were Troll (122,000 bbl/d), Ekofisk (110,000 bbl/d), and Grane (95,000 bbl/d).

According to Statistics Norway, total investments in oil and gas extraction and pipeline transport in 2013 were $34.6 billion, $0.6 billion higher than in 2012.

Barents Sea

Goliat is the first oil field to be developed in the Barents Sea. Discovered in 2000, it is about 45 nautical miles offshore the town of Hammerfest, which will be its land base. Goliat's oil reserves are estimated at 174 million barrels in two separate reservoirs, both with an overlying natural gas cap, and with low pressures in the reservoirs that require gas to be reinjected. The estimated gas reserves are 282 billion cubic feet (Bcf). In May 2009, the Norwegian government approved the plan for development and operation of the Goliat oil field by licensees Eni (65 per cent) and Statoil (35 per cent). Construction is currently underway. Production at Goliat is expected to begin in the fall of 2014. The field is expected to reach peak oil production of 93,000 bbl/d by the second year of production and decline rapidly thereafter. Gas production will reach its peak of 45.9 Bcf after the first year of production.

In April 2011, it was reported that Statoil and its partners Eni Norge and Petoro struck oil and gas at the Skrugard prospect in the Barents Sea. This discovery was one of Norway's largest in recent years. In January 2012, the Havis field was discovered in the same license block. Skrugard and Havis together, renamed the Johan Castberg field, hold between 400 and 600 million barrels of recoverable reserves. Statoil announced that it hopes to begin Skrugard production in 2018. Skrugard is located about 130 nautical miles from the coast and well north of the Goliat and Snovit fields.

North Sea

The Norwegian Parliament approved joint development and operating plans in June 2012 for Lundin's Edvard Grieg oil and gas field and Det Norske's Ivar Aasen Field (formerly called Draupne). Estimated to hold 186 million barrels of oil equivalent, Edvard Grieg is scheduled to come onstream in the fourth quarter of 2015 and produce 100,000 bbl/d of oil at its peak production. The nearby Ivar Aasen field, estimated to have 150 million barrels of recoverable oil, will be tied into Edvard Grieg and begin producing oil in the fourth quarter of 2016.

The Johan Sverdrup oil field was the largest oil discovery in the world in 2011, with reserves estimated at between 1.8 and 2.9 billion barrels of recoverable oil. It is located 75 nautical miles west of Stavanger in the North Sea. Johan Sverdrup was initially believed to consist of two fields four miles apart: Avaldnes, discovered by Lundin in 2010, and Aldous, discovered by Statoil in 2011. Further exploration activities revealed they constitute one giant field, renamed Johan Sverdrup in 2012, when a cooperation agreement was signed between the field partners naming Statoil the operator. Partners also include Maersk, Petoro, and Det Norske. The field is expected to be a new stand-alone processing and transport hub, with production starting in 2019, eventually reaching a peak of 550,000-650,000 bbl/d, accounting for 25 per cent of the forecasted production from the NCS.

Exploration interest in the NCS remains strong on the part of major international oil companies. In February 2014, Norway announced that it will offer 61 blocks for oil and gas exploration for its 23rd licensing round on the NCS. Of the 61 blocks, 54 will be in the Barents Sea and 7 will be in the Norwegian Sea. 

Oil exports

Norway has an extensive network of subsea oil pipelines, including eight major domestic oil pipelines with a total capacity of just under 2 million bbl/d. The pipelines connect offshore oilfields with onshore processing terminals, according to the NPD. There are many smaller pipelines that connect North Sea fields to either the Oseberg Transport System or the Troll I and II pipeline systems. Remaining offshore production is brought ashore via shuttle tanker.

ConocoPhillips operates the 913,000 bbl/d capacity subsea Norpipe, which connects Norwegian oil fields in the Ekofisk system (as well as associated fields in both Norwegian and United Kingdom waters) to the oil terminal and refinery at Teesside, England.

North Sea Brent, the most widely used global crude pricing benchmark, comprises of four crude production streams: Brent, Forties, Ekofisk, and Oseberg. The Brent and Forties crude streams are produced offshore in the waters of the United Kingdom, and the Ekofisk and Oseberg crude streams are produced offshore in the waters of Norway. From 2010 to 2013, North Sea Brent crude oil loadings averaged 1 million bbl/d, of which the two Norwegian crude streams accounted for roughly 44 per cent. 

Loadings of these four crude streams have been generally declining over the past five years, with the exception of Forties crude, which grew 7 per cent from 2012 to 2013. In the beginning of 2014, there were discussions (primarily by the pricing agency Platts) to change the way the Brent benchmark is priced by potentially adding crude streams outside of the North Sea if new Norwegian production coming online in future years is not significant. Dwindling production raises the concern that supply shocks to the four crude streams could increase price volatility of the world benchmark. Even though the benchmark itself accounts for only a small portion of total world crude production, it remains a key indicator for world crude oil pricing.

Although crude production has been declining in the Ekofisk and Oseberg fields, the NPD is looking to improve recovery in these mature fields based on the estimated amount of resources still remaining. The NPD estimates that while 2.8 billion barrels of crude have been produced from the Ekofisk field since production began, there are still 820 million barrels of remaining reserves in the field, with potentially 3.6 billion more barrels of oil resources (not-yet economically recoverable oil) remaining after the planned, permanent shutdown of the field. Likewise, the NPD estimates that 2.3 billion barrels of crude have been produced from the Oseberg field since production began, with 142 million barrels of remaining reserves in the field and potentially 1.4 billion more barrels of oil resources that will remain after the planned, permanent shutdown.