Increased production value – a temporary reprieve for the extraction industries

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The Norwegian oil- and gas industry had its second good year in a row because of higher oil- and gas prices in 2018. However, production is still decreasing, and the extraction industries are not showing signs of preparing for increased activity in the future. The support industries on the other hand seem to be betting on a slightly brighter tomorrow.

Written by: Magnus Dybwik Larsen

Preliminary figures for extraction and related services show an increase in production value of 25.2 percent, from 629 billion in 2017 to 788 billion in 2018. The increase comes as a result of increased oil- and gas prices, while the decrease in production volume has been moderate.

Figure 1

Figure 1. Value of production, intermediate consumption and value added. Total for the oil and gas industries

Because of the price increase the value added in the extraction industries also increased sharply. In recent years reduced costs, measured by intermediate consumption, have contributed to this increase. However, in 2018 intermediate consumption has gone up by 14 percent.

Figure 2. Value added, by industry

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Extraction of oil and natural gas, incl. transport via pipelines 99.56 99.82 107.52 112.64 119.37 163.74 177.56 126.21 171.96 342.16 322.31 279.73 295.86 359.29 465.22 546.65 491.69 633.14 441.89 486.93 600.98 648.08 600.91 587.25 473.64 389.63 493.17 636.97
Support activities for petroleum and natural gas extraction 1.96 2.15 2.61 3.67 6.23 7.56 8.60 6.41 9.11 11.94 10.96 9.92 14.31 17.88 20.43 25.26 39.75 39.05 39.51 41.07 49.43 50.46 49.89 38.57 32.05 32.82

Despite the extraction industries having a great year on the income side employment remained stable compared to the previous year. This is in keeping with the sectors focus on downsizing in recent years, and bears witness that this year’s result might be a swan song for the extraction industries rather than a return to previous greatness.

Positive signs from the support industries

For a long time, the support industries have had higher employment, despite accounting for a much smaller part of the production value, compared to the extraction industries. Employment in the support industries has also been less stable and appears to be affected more by the ups and downs of the market.

In 2017 both production value and employment fell in the support industries, despite the high oil- and gas prices. For employment this was a continuation of a negative trend that started in 2015, and which has continued uninterrupted until now. However, in 2018 production value increased by 9.3 percent, and employment by an impressive 17.2 percent.

Figure 3. Employment, by industry

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Extraction of oil and natural gas, incl. transport via pipelines 15830 16119 17338 16878 16498 16185 16183 15865 15998 15154 15079 16450 17396 17119 16780 18276 18675 20150 21433 21930 23869 25625 27159 27258 26470 25357 23840 23814
Support activities for petroleum and natural gas extraction 4173 4603 4437 5517 7280 8080 9082 7743 9786 12358 12569 12357 11841 13470 15697 17819 26523 26828 30754 31421 35676 36814 33282 29182 25485 29860

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