Oil investment estimate for 2018 adjusted downward
Total investments in oil and gas activity in 2018, including pipeline transportation, are NOK 156.5 billion, which is 2.2 per cent lower than estimated in the previous quarter.
The downward adjustment in the estimate for 2018 is driven by a decrease in the estimate for fields on stream.
Figure 1. Estimated investments in extraction and pipeline transport collected in 2nd quarter same year
|Extraction and pipeline transport|
The oil companies’ latest estimates for 2018 show that oil investments are expected to amount to NOK 156.5 billion, shows Investments in oil and gas, manufacturing, mining and electricity supply. This is 1.3 per cent higher than the corresponding figure for 2017 given in the 2nd quarter of 2017. The growth is lower than indicated in the previous survey, which showed a 7.1 per cent increase. The lower increase now indicated is due to the current downward adjustment in the estimate for 2018 and an upward adjustment in the estimate for 2017 given in the corresponding surveys last year.
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. For more details about total investments, please see the following article.
Initial estimates for 2019 indicate an increase in oil and gas investments
The investments in oil and gas extraction and pipeline transport for 2018 are estimated at NOK 155.5 billion. This is 8 per cent higher than the corresponding estimate for 2018 given in the 2nd quarter of 2017. The increase is due to higher investments within the categories field development and exploration, but the estimates also indicate a decrease in the investment categories onshore activity, fields on stream, pipeline transportation and shutdown and removal.
In December, seven plans for development and operation (PDO) were submitted to the government. These projects were therefore included in the previous survey. Another project was just submitted in May, and will therefore be included in this survey. The investments that will be carried out in 2018 for these 8 projects were not included in the initial estimate for 2018 given in the 2nd quarter of 2017, which is the estimate we now compare the first estimate for 2019 with.
PDOs are also expected to be submitted for more development projects later this year; Johan Sverdrup phase 2 and Troll Future, which are expected to be submitted in the 3rd quarter, and Luno 2 and Mikkel South, which are expected to be submitted later this year. In addition, several projects are expected to be delivered in 2019. If the schedules for these plans are realised, the accumulated investment costs in 2019 from these projects will increase the investments in field development even more, compared to the present estimate.
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 2019/2018. Estimates collected in Q2 the previous year
|Contribution by ind.||Percentage change|
|Shutdown and removal||-0.4|
|Fields on stream||-4.5|
|Exploration and concept studies||4.5|
|Extraction and pipeline transport||8.0|
High estimates for exploration
The investments in exploration are estimated to be NOK 33.3 billion in 2019. This is 24 per cent higher than the corresponding estimate for 2018 given in the 2nd quarter of 2017. The exploration estimate given in the 2nd quarter is based on the operators’ preliminary licence budgets. During the autumn and early winter, these preliminary licence budgets will be considered in relation to the oil companies’ scope for investment. The decided budgets are normally lower than the preliminary budgets. The extent of the deviation between the preliminary budgets and the decided budgets depends on oil price expectation and rig availability. Oil price expectations partly reflect the will to invest in exploration, and rig availability reflects the ability to carry out the desired exploration activity. Oil price expectation is influenced by the development in oil prices. Both the positive development in oil prices in the last half year and the abundant rig availability indicate a lower relative deviation between the preliminary budgets and the decided budgets than in a normal year. Because of the high estimate for 2019, there is still reason to believe that parts of the exploration planned for 2019 will be postponed.
Fall in investments in fields on stream
The investments in fields on stream are now estimated to be NOK 53.6 billion in 2019. This is 11 per cent lower than the estimate for 2018 given in the 2nd quarter of 2017. The decrease indicated for fields on stream in 2019 is partly linked to the extensive upgrades taking place in some mature fields. The scope of these projects requires new PDOs to be drawn up. These projects are therefore categorised as field developments in this survey.
Downward adjusted estimates for 2018
The investments in oil and gas extraction and pipeline transport for 2018 are estimated at NOK 156.5 billion. This is 2.2 per cent lower than the estimate given in the previous quarter. Lower figures within fields on stream more than offset the negative contribution from higher estimates within exploration and field development. The decrease in fields on stream stems from the category production drilling. Some drilling campaigns have been shorter than previously expected and others have been postponed. In addition, earlier reports on a couple of fields have given too high estimates, and these have now been adjusted downward.
The estimate for 2018 is 1.3 per cent higher than the corresponding estimate for 2017 given in the 2nd quarter of 2017. This is a lower increase than indicated in the previous survey. The estimated increase from 2017 to 2018 is due to higher investments within the categories field development and exploration. The estimates for fields on stream, onshore activity, pipeline transportation and shutdown and removal have the opposite path, 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 4. Contribution by cost category for rate of change in extraction and pipeline transport 2018/2017. Estimates collected in Q2 same year
|Contribution by ind.||Percentage change|
|Shutdown and removal||-0.3|
|Fields on stream||-3.6|
|Exploration and concept studies||2.2|
|Extraction and pipeline transport||1.3|
Low investment activity in the 1st quarter
The final investments in 4th quarter came to NOK 31.4 billion. This is 20 per cent lower than estimated in the previous quarter, and 19 per cent lower than the investments in the 4th quarter, unadjusted. The seasonally adjusted decrease from the 4th quarter to the 1st quarter was 8.4 per cent.