Investment growth in oil in 2018
Total investments in oil and gas activity in 2018, including pipeline transportation, are now estimated at NOK 160 billion. The estimate is 7.1 per cent higher than corresponding estimates for 2017, given in the 1st quarter of 2017.
Total investments in oil and gas extraction and pipeline transport for 2017 were NOK 148.8 billion, shows Investments in oil and gas, manufacturing, mining and electricity supply. This is NOK 15.7 billion, or 9.5 per cent lower than final investments in 2016. The decrease in 2017 is mainly due to lower investments within fields on stream, onshore activity and shutdown and removal.
Figure 1. Final investments in extraction and pipeline transport
|Extraction and pipeline transport|
2017 is the third consecutive year with decreasing oil and gas investments. Falling oil prices and higher costs decreased the profitability in the oil sector significantly. The sector had to reduce and postpone investment activities and cut costs in remaining investment activities. During 2017, the oil price stabilised at a higher level and the costs in the sector were reduced significantly through efficiency improvement measures, simplifications and lower prices to suppliers. In the last year, this development has triggered several new field development projects with brake-even prices significantly lower than the present oil price level. Therefore, three consecutive years with investments decline are expected to be followed by investment growth in 2018.
Figure 2. Investments. Extraction and pipeline transport. Estimates given on different points in time
Quarterly investment statistics for oil and gas extraction and pipeline transport are included in the survey ‘Investments in oil and gas, manufacturing, mining and electricity supply’. Further details of total investments are available in the following article.
Upward adjusted field development estimate for 2018
The investments in oil and gas extraction and pipeline transport for 2018 are estimated at NOK 160 billion. This is 11 per cent higher than the estimate given in the previous quarter. Almost the entire increase emanates from field development. In December, seven plans for development and operation (PDO) were submitted to the government. These projects are therefore now included in this survey.
PDOs for more development projects are expected to be submitted later this year. Among these are Nova (formerly Skarfjell), which is expected to be submitted in the 2nd quarter, and Johan Sverdrup phase 2 and Troll Future, which are expected to be submitted in the 3rd quarter. If the schedules for these plans are realised, the accumulated investment costs in 2018 from these projects will increase the investments in field development even more, compared to the present estimate.
The estimate for 2018 is 7.1 per cent higher than the corresponding estimate for 2017, given in the 1st quarter of 2017. The estimated increase from 2017 to 2018 is due to higher investments within the categories field development, exploration and fields on stream. The estimates for onshore activities, pipeline transportation and shutdown and removal are moving in the opposite direction and show a decrease compared to the corresponding estimates given for 2017.
1 The contribution by cost category is calculated by multiplying the percentage change of the category with the category's share of investments in extraction and pipeline transport
Figure 3. Contribution by cost category for rate of change in extraction and pipeline transport 2018/2017. Estimates collected in Q1 same year¹
|Contribution by cost category||Percentage change|
|Shutdown and removal||-0.2|
|Fields on stream||1.2|
|Exploration and concept studies||2.3|
|Extraction and pipeline transport||7.1|
Lower investments in 2017
Total investments in oil and gas extraction and pipeline transport for 2017 were NOK 148.8 billion. This is 9.5 per cent lower than final investments in 2016. All investment categories within extraction show a decrease, while pipeline transport increased by 78 per cent, but since this category has low investment levels its contribution to the total investment is modest. Fields on stream, onshore activities and shutdown and removal contribute most to the decrease from 2016 to 2017.
1 The contribution by cost category is calculated by multiplying the percentage change of the category with the category's share of investments in extraction and pipeline transport.
Figure 4. Contribution by cost category for rate of change in extraction and pipeline transport 2017/2016. Final investments collected in Q1 the following year¹
|Contribution by cost category||Percentage change|
|Shutdown and removal||-2.4|
|Fields on stream||-3.5|
|Exploration and concept studies||-0.7|
|Extraction and pipeline transport||-9.5|
From 2010 to 2014, the oil investments increased by 70 per cent. From 2014 to 2017, the investments decreased by 33.7 per cent. The increase from 2010 to 2014 was driven by high and relatively stable crude oil prices. The high investment activity resulted in elevated demand for products and services from the suppliers, which in turn boosted the prices of the input factors in the oil industry. The significantly lower oil prices over the last three years have led to the opposite development, with a strong decrease in investments and gradually cheaper input factors in the oil sector. Both the real growth in investments from 2010-2014 and the real decrease in investments from 2014-2017 are lower than the nominal changes in the investments presented in these statistics.
36 exploration wells initiated
The investment costs within exploration and concept studies came to NOK 21.8 billion in 2017, which is 5.3 per cent lower than in 2016.
A total of 36 exploration wells were initiated in 2017, which is the same figure as in 2016. The oil companies used NOK 11 billion and NOK 8.7 billion on exploration drilling in 2016 and 2017 respectively. Therefore, the average cost for each well was lower in 2017 than in 2016.
Higher investments in 4th quarter
The final investments in the 4th quarter came to NOK 38.9 billion. This is 5 per cent lower than estimated in the previous quarter, but 11.4 per cent higher than the investments in the 3rd quarter, unadjusted. The seasonally adjusted increase from the 3rd quarter to 4th quarter was 9.6 per cent.
The increase from the 3rd quarter to 4th quarter is mainly due to higher investments within the field development category.