The investments in 2024 are now estimated to be NOK 207 billion, which is 13.7 per cent more than estimated in the previous survey in May. The upward adjustments for both 2023 and 2024 are largely driven by higher estimates within the categories fields on stream and field development and are mainly related to the fact that investments which in previous measurements were planned to be carried out later have now been accelerated to this year and 2024. This applies to both construction of infrastructure for new fields and production drilling. It is reported that the periodization of the investments between the various years is still uncertain and that there may be shifts in later measurements. Another reason for the increase in estimates is that a weakened Norwegian krone reinforces the already high growth in investment prices, which contributes to increasing investments measured in current prices.
The investment estimate for 2023 now indicates a growth of 23 percent compared to the corresponding estimate for 2022, given a year ago, the statistics oil and gas, manufacturing, mining and quarrying and electricity supply show.
The strong growth indicated has its background in the fact that many new field developments started in December last year. These had almost no incurred costs last year, but they will have significant investments this year.
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.
Estimate jump for 2024
The investments in oil and gas extraction and pipeline transport for 2024 are estimated at NOK 207 billion. This is as much as 53 per cent higher than the estimate given for 2023 in 3rd quarter 2022.
Almost all the indicated growth is driven by the fact that the estimate for field development is more than twice as high as the corresponding estimate for 2023, given a year ago. Development projects are only included in the investment survey when a plan for development and operation (PDO) is submitted to the authorities. In the Norwegian parlament's tax measures package, which was adopted in June 2020 to remedy the industry in connection with the sharp drop in oil prices early in the corona pandemic, favorable taxation was provided for all developments for which PDO was delivered before the end of last year. This is the reason why a great many PDOs were delivered last year, most of them towards the end of the year. The far higher estimate for 2024 now than in the corresponding estimate for 2023 a year ago is largely due to the fact that these PDOs were not included in the count a year ago, but they are included in the count now. As figure 2 above shows, the estimate for 2023 has increased a lot since the estimate given a year ago. Since few new projects are expected to be delivered in the next couple of years, it is unlikely that the estimates for 2024 will increase to the same extent as the estimates for 2023 have done in the past year. Therefore, the indicated growth now estimated for 2024 is artificially high, and should be interpreted with caution.
The estimates for fields on stream and exploration are both higher than the corresponding estimates for 2023. The estimates also indicate a strong rise for the categories pipeline transportation and shutdown and removal in 2024, but since these categories initially have low investment levels, they only contribute modestly to the increase estimated for the investments in total. It is only the estimate for onshore activities that has a lower estimate for 2024 and which therefore contributes to pulling the total estimate down somewhat.
The estimate for 2023 is further adjusted upwards
Total investments in oil and gas activity in 2023, including pipeline transportation, are estimated at NOK 213 billion. This is NOK 15 billion more than estimated in the previous quarter. The increase is mainly in fields on stream, field development as well as exploration and concept studies. The remaining categories are roughly unchanged from the previous measurement.
There have been no new projects, so the increase is in already existing fields. Several fields report a heavier investment profile than previously reported, so that some investments previously planned to be carried out in 2024 have now been brought forward to this year. Some of the increase in the estimate is also related to the fact that the prices of many investment goods have risen. The weakening of the Norwegian krone this year against the dollar has reinforced this price increase measured in Norwegian kroner, which in turn has contributed to rising investment costs.
The estimate for investments in pipeline transportation and extraction of oil and gas for 2023 is now 23 per cent higher than the corresponding estimate for 2022, given in the 3rd quarter of last year. The previous measurement gave indications of a growth of 18 per cent this year.
As Figure 4 above shows, it is field development that is also driving the upswing indicated for 2023. Fields on stream and pipeline transport also contribute slightly to higher investments, while exploration, onshore activities as well as shutdowns and removals contribute to dampening growth in 2023.
Investment growth in the 2nd quarter
The final investments in the 2nd quarter came to NOK 51.2 billion. This is 0.5 per cent higher than estimated in the previous measurement, and 13 per cent lower than the investments in the 1st quarter, unadjusted. The seasonally adjusted growth from the 1st to the 2nd quarter was only 2.7 per cent. The reason for this is that seasonally, investments tend to be far higher in the 2nd quarter than in the 1st quarter. The increase from the 1st to the 2nd quarter came within fields in operation, pipe transport and shutdown and removal. Investments carried out in the 2nd quarter were 17 per cent higher than in the same quarter in 2022.
The forecast for 2023 assumes strong growth in the second half of the year
Investments in the first half of this year are 15 per cent higher than investments made in the first half of 2022. Based on this, one is not quite on track in relation to the fact that current estimates for 2023 indicate a growth of 23 per cent. With investments of NOK 96.6 billion in the first half of the year, investments of NOK 116.6 billion in the second half of the year are expected in order for the current estimate for 2023 to be realized. In that case, it will represent an increase of around 21 per cent from the first to the second half of the year. Figures from the last 20 years show that investments have been on average about 10 per cent higher in the second half of the year than in the first half of the year.
On the other hand, there are distinctive features of the estimates this year that support the realism of the investment plans. Much of the increase in investments in the second half of the year is linked to the many new developments that started at the end of last year, and this escalation of development investments is in line with the development in investments in previous developments. The special thing now is that there are so many developments that started at roughly the same time, so that many development projects get a relatively similar escalation at roughly the same time. The result is that the accumulated investments can also increase sharply. Development plans where the project has started are also a type of investment plan that has a high probability of being realized since all production is dependent on the completion of the development, as well as the fact that investments already made will then be pure losses. On other activities, such as exploration and upgrading/maintenance of fields in operation, on the other hand, you can choose to cancel or postpone without stopping production, therefore investment plans for such projects are not as reliable as estimates for field developments. Against this background, there is reason to believe that the investment plans for the second half of the year are largely realistic, and that it is therefore likely that there will be higher relative growth than normal from the first to the second half of this year.