Oil investment estimate for 2021 upward adjusted

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Total investments in oil and gas activity in 2021, including pipeline transportation, are estimated at NOK 173.6 billion, which is 4.4 per cent higher than estimated in the previous quarter.

The estimate for 2021 in the statistics oil and gas, manufacturing, mining and quarrying and electricity supply now indicates a fall by 6.4 per cent from 2020 to 2021. Total accrued investments in oil and gas extraction and pipeline transport for 2020 were NOK 179.3 billion, which is 1.0 per cent higher than final investments in 2019.  The final investments in 2019 were 1.8 per cent lower than estimated in the previous survey.

Figure 1. Final investments in extraction and pipeline transport

Extraction and pipeline transport
2010 131839
2011 153241
2012 179321
2013 218659
2014 224402
2015 201191
2016 164492
2017 148809
2018 151831
2019 177544
2020 179308

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).

Preliminary projections predict a fall in investment in 2022

The investments in oil and gas extraction and pipeline transport for 2022 are estimated at NOK 138.5 billion. This is 8.9 per cent lower than the estimate given for 2021 in 1st quarter 2020.

The indicated decrease in 2022 is mainly due to low estimates in field development. The estimate in field development is 14 per cent lower than the corresponding estimate for 2021. The decline is related to more developments being completed in 2021 or early in 2022. On other developments, investments will be lower in 2022 compared to the present year.

It is expected to be submitted some plans for development and operation (PDOs) to the government during the present year. Among these are Kristin South, Frosk, Kobra East/Gekko and Tommeliten Alpha. Furthermore, it is also expected that PDOs will be delivered on very many projects by next year. This may be related to the fact that the Parliament’s tax measures package, which was adopted in June last year, provides favorable taxation for all development investments for PDOs submitted before 1 January 2023. Investments in projects tend to be modest in the first year of development. When the vast majority of these projects also plan to start up late next year, these will have relatively low investments made in 2022.

Figure 2. Investments. Extraction and pipeline transport. Estimates given on different points in time

2018 2019 2020 2021 2022
Feb t-1 121502 145403 158463 151990 138516
May t-1 143970 155508 172380 145575
Aug t-1 141748 165100 174817 148614
Nov t-1 144333 175251 182639 166270
Feb t 160010 172711 185427 173584
May t 156454 183738 180296
Aug t 156313 181733 184572
Nov t 155457 182929 182511
Feb t+1 151831 177544 179308

Estimate for 2021 upward adjusted

Total investments in oil and gas activity in 2021, including pipeline transportation, are estimated at NOK 173.6 billion. This is 4.4 per cent higher than estimated in the previous quarter. It is especially increased estimates for fields on stream that contribute to the upward adjustment.

The increase for this category is partly due to shifts in investments from 2020 to 2021 on some projects. In addition, some investments that were previously planned to be made in 2022 have now been accelerated to 2021. The temporary changes in the petroleum tax system make it particularly favorable for tax holders on the Norwegian shelf to make investments in the years 2020 and 2021. The accelerated investment plans from 2022 to 2021 may be related to this.

The estimate for 2021 is 6.4 per cent lower than the corresponding estimate for 2020, given in the 1st quarter 2020. This is a lower fall than suggested in the previous survey. Then the projections for 2021 showed a decrease of 9 per cent.

As figure 3 below shows, it is mainly the estimates for the category field development that are behind the decline that are indicated from 2020 to 2021, while the categories fields in stream and onshore activities are moving in a positive direction and helping to curb the stated decline.

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 2021/2020. Estimates collected in Q1 same year¹

Contribution by cost category Percentage change
Pipeline transportation 0.1
Shutdown and removal -0.3
Onshore activities 0.6
Fields on stream 2.0
Field development -8.7
Exploration and concept studies -0.2
Extraction and pipeline transport -6.4

Small investment growth in 2020

Total investments in oil and gas extraction and pipeline transport for 2020 were NOK 179.3 billion. This is 1.0 per cent higher than final investments in 2019. It was increased investments in the categories of fields on streams and shutdown and removal that contributed to growth last year, while lower investments in exploration and field development contributed to curbing growth.

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 2020/2019. Final investments collected in Q1 the following year¹

Contribution by cost category Percentage change
Pipeline transportation -0.1
Shutdown and removal 1.7
Onshore activities -0.1
Fields on stream 3.7
Field development -0.7
Exploration and concept studies -3.6
Extraction and pipeline transport 1.0

In this survey, investments are measured only in current value. If one is to measure the development in real investments, one must also take into account the development in investment prices in the extraction industries. According to preliminary figures from the National Accounts, investment prices in the industry increased by 6.1 per cent from 2019 to 2020. Although this investment survey shows a small investment growth in current value, the real investment activity has clearly fallen from 2019 to 2020.

From early March 2020, the oil companies were affected by the corona pandemic directly through Norwegian infection control measures and indirectly through global corona measures leading to a sharp fall in oil prices. Infection control measures and outbreaks on some rigs and platforms affected the investments and some planned activity was postponed in the spring of 2020. This contributed to a seasonally adjusted fall in investments of 8.6 per cent from the first quarter to the second quarter. The fall in oil prices led to many oil companies on the Norwegian continental shelf announcing significant investment cuts. It was to curb this The Parliament adopted the tax measures package. The investment estimate given in the survey in February last year, just before the pandemic, was only 3 per cent higher than the final investments in 2020. Some of this decline can be attributed to infection control measures. It can be argued that the oil companies have maintained about the level of investment they budgeted for before the pandemic occurred.

Higher investments in 4th quarter

The final investments in the 4th quarter came to NOK 46.8 billion. This is 6.4 per cent lower than estimated in the previous quarter, but 8.1 per cent higher than the investments in the 3rd quarter, unadjusted. The seasonally adjusted increase from the 3rd quarter to 4th quarter was 4.1 per cent..