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Oil investment estimate for 2019 adjusted downward

Published:

The estimated total investment in oil and gas activity in 2019, including pipeline transportation, is NOK 172.7 billion, which is 1.4 per cent lower than estimated in the previous quarter.

In the statistics for oil and gas, manufacturing, mining and quarrying and electricity supply, the investment estimates for 2020 are being released a quarter earlier than usual. The investment for 2020 is estimated at NOK 158.5 billion. This is 9 per cent higher than the corresponding figure for 2019 given in the 1st quarter of 2018.

The strong growth indicated for 2019 should be interpreted with caution. Because the estimate given for 2020 is now more complete than the estimate given for 2019 in the 1st quarter of 2018, the growth indicated for 2020 is artificially high. The growth indicated from 2019 to 2020 is mainly due to the much higher exploration estimate. In addition, the estimates for fields on stream and shutdown and removal show an increase in 2020, while the estimate for the category field development shows a decrease from 2019 to 2020.

Several plans for development and operation (PDOs) are expected to be submitted to the government in both 2019 and 2020. If the schedules for these plans are realised, the accumulated investment costs in 2020 from these projects will increase the investment in field development compared to the present estimate.

Figure 1. Investments. Extraction and pipeline transport. Estimates given on different points in time

2016 2017 2018 2019 2020
Feb t-1 175770 158501 121502 145403 158463
May t-1 192477 154905 143970 155508
Aug t-1 188878 152194 141748 165100
Nov t-1 179204 146643 144333 175251
Feb t 171758 149403 160010 172711
May t 169896 154381 156454
Aug t 168739 155627 156313
Nov t 170280 150842 155457
Feb t+1 164492 148809 151831

Earlier publishing of estimates for the following year

In previous years, the investment estimates for the next year were released in the second quarter, but from now on these will be published in the first quarter. You can find the estimates for 2020 broken down by the main cost categories here: http://www.ssb.no/en/statbank/sq/10017780/

Estimates for the next year were reported in February, which is also earlier than previously, but these figures have not been sufficiently incomplete, particularly in relation to exploration. Since the figures are now more complete, we have decided to release these earlier estimates. We have published estimates given for the next year dating back to 2002 in Statbank.

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, see the following article.

Better comparability reduces indicated growth for 2019

The investments in oil and gas extraction and pipeline transport for 2019 are estimated at NOK 172.7 billion. This is 7.9 per cent higher than the estimate given for 2018 in the 1st quarter of 2018. This is significantly lower growth than the 21.4 per cent growth indicated for 2019 in the previous survey. As figure 1 above shows, the estimate for 2018 strongly increased from the survey in the 4th quarter of 2017 to the 1st quarter of 2018, mainly due to the submission of seven PDOs between these surveys. The inclusion of these development projects in the figures for 2018 makes the estimates for 2018 and 2019 more comparable in the present survey and the indicated growth for 2019 is therefore lower than in the previous survey.

More PDOs on development projects are expected to be submitted in 2019. These are Luno 2, Duva, Tor II and Fogelberg. If the schedules for these plans are realised, the accumulated investment costs in 2019 from these projects will increase the investment in field development further, compared to the present estimate, all other things being equal.

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 2. Contribution by cost category for rate of change in extraction and pipeline transport 2019/2018. Estimates collected in Q1 same year¹

Contribution by cost category Percentage change
Pipeline transportation -0.8
Shutdown and removal 0.6
Onshore activities 0.0
Fields on stream -3.0
Field development 8.2
Exploration and concept studies 2.9
Extraction and pipeline transport 7.9

Small investment growth in 2018

Total investments in oil and gas extraction and pipeline transport for 2018 were NOK 151.8 billion. This is 2 per cent higher than final investments in 2017.

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 from 2014 to 2016 led to the opposite development, with a strong decrease in investments and gradually cheaper input factors in the oil sector. The combination of higher oil prices and lower costs triggered the start-up of several new investment projects on the Norwegian Shelf, which contributed to investment growth in 2018.

Figure 3. Final investments in extraction and pipeline transport

Extraction and pipeline transport
2008 129354
2009 140519
2010 131839
2011 153241
2012 179321
2013 218659
2014 224402
2015 201191
2016 164492
2017 148809
2018 151831

Higher exploration and development activity in 2018

The investment costs within exploration and concept studies came to NOK 25.5 billion in 2018, which is 17 per cent higher than in 2017. The increase is mainly due to higher investments within exploration drilling, which increased by 65 per cent to NOK 14.4 billion.

The number of exploration wells increased by 47 per cent to 53 wells. The average cost for each well increased by 14 per cent. The number of exploration drilling days increased by as much as 123 per cent from 2017 to 2018. The average cost for each drilling day was 26 per cent lower in 2018 than in the previous year.

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. Final investments collected in Q1 the following year¹

Contribution by cost category Percentage change
Pipeline transportation 0.0
Shutdown and removal -0.6
Onshore activities -2.0
Fields on stream -4.0
Field development 6.2
Exploration and concept studies 2.5
Extraction and pipeline transport 2.0

Final investments in field development came to NOK 62 billion in 2018. This is 17 per cent higher than in the previous year. The main reason for the increase was the start-up of several new investment projects in late 2017. 

Higher investments in 4th quarter

The final investments in the 4th quarter came to NOK 43.3 billion. This is 7.7 per cent lower than estimated in the previous quarter, but 11 per cent higher than the investments in the 3rd quarter, unadjusted. The seasonally adjusted increase from the 3rd to 4th quarter was 8.3 per cent.