The US Energy Information Administration (EIA) provided its country analysis brief of Norway on December 28, revealing an oil and gas sector that is struggling under the weight of low oil prices. As Europe’s largest oil producer, the world’s third-largest natural gas exporter, and a crucial supplier of O&G to other European countries, grasping where Norway stands as we enter 2017 is essential in understanding the broader global oil market.

Norway O&G Overview

In 2015, the country’s oil and gas sector accounted for nearly 40 percent of its export revenues and more than 15 percent of its GDP. Norway’s petroleum and other liquids output peaked at 3.4 M/bpd in 2001 and dropped to 1.8 M/bpd in 2013 before rising to slightly less than 2 M/bpd in 2015. On the other hand, natural gas production increased almost every year since 1993, except for a small decline in Y/Y production in 2011 and 2013.

According to data cited by the EIA from the Oil & Gas Journal, Norway held 5.14 billion barrels of proved crude oil reserves as of January 1, 2016, the largest oil reserves in Western Europe. Production of petroleum and other liquids that year was 1.96 M/bpd, 3 percent higher than 2014. Norway’s oil output has been gradually declining since 2001 as oil fields have matured, although production in 2013 and 2014 increased moderately. The Norwegian Petroleum Directorate (NPD) anticipates that oil production will continue declining slowly from 2016 to 2019, before beginning to increase again in 2020 due to the start-up of Johan Sverdrup field.

The three largest producing crude and condensate fields in 2015 were Troll (121,000 b/d), Ekofisk (112,000 b/d), and Snorre (110,000 b/d). The Troll and Ekofisk fields are lin the Norwegian portion of the North Sea, the source of most of Norway’s current output. The Snorre field is located a further north, in the southern Norwegian Sea.

Due to depressed oil prices, investment in the O&G sector is declining. In 2015, total investment in oil and natural gas extraction and pipeline transport were NOK 195 billion (US $23 billion), NOK 25 billion lower than in 2014. Further, as of August 2016, estimated total investments in 2016 are more than 15% lower than investments in 2015. The lower levels of investment are the result of lower costs and lower activity.

North Sea: Several Major Discoveries in Recent Years

Turning to the North Sea, though most of Norway’s fields in the region are in decline, several significant discoveries have been made in recent years. In 2012, the government green-lighted the joint development and operating plans for Lundin’s Edvard Grieg oil and natural gas field and Det Norske’s Ivar Aasen Field. Estimated to hold 206 million barrels of oil equivalent, Edvard Grieg commenced production in November 2015 and is expected to produce 100,000 b/d of oil equivalent at its peak. The Ivar Aasen field, located nearby, is estimated to hold 183 million barrels of oil equivalent. It has been tied into Edvard Grieg and started producing oil in the 4Q16.

With estimated reserves of between, 1.7 and 3 billion barrels of recoverable oil equivalent resources, the Johan Sverdrup oil field was the largest oil discovery in the world in 2011. Located 96 miles west of Stavanger in the North Sea, Johan Sverdrup was initially believed to consist of two fields four miles apart: Avaldnes and Aldous. However, additional exploration activities revealed they comprise one large field, renamed Johan Sverdrup in 2012. Production is scheduled to begin in late 2019, ultimately reaching a peak of 550,000 b/d-650,000 b/d- representing 25% of the forecasted output from the Norwegian continental shelf.

Barents Sea: Goliat and Johan Castberg

In the Barents Sea, the Goliat field is the first to be developed in the region. Discovered in 2000, Goliat’s recoverable oil reserves are estimated at 179 million barrels. Italy’s Eni is developing the field with a cylindrical FPSO platform. The FPSO was built in South Korea, shipped to Hammerfest, Norway, and in May 2015 was towed to its destination at the Goliat field, offshore Norway. Production at Goliat commenced in March 2016 and is anticipated to ramp up to a peak of 93,000 b/d of oil before declining to around 30,000 b/d.

Another recent discovery in Norway’s Barents Sea is the Johan Castberg field, which encompasses three discoveries made in 2011, 2012, and 2014. It is estimated to hold between 400 and 650 million barrels of oil. Statoil was scheduled to decide on a development plan for the field in 2015, but mostly due to its remote Arctic location, development will be relatively costly. In March 2015, Statoil announced it plans an investment decision in 2017.

A Closer Look at Exports

Taking a closer look at exports, data from Statistics Norway say that the country exported an estimated 1.3 million b/d of crude oil in 2015, of which 97% went to European countries. The top five importers of Norwegian crude oil in 2015 were the United Kingdom (40%), the Netherlands (26%), Germany (9%), Sweden (7%), and Denmark (4%).

About The Author Jeff Reed

I specialize in analysis of the oil and gas sector- with emphasis on the Middle East, OPEC, and the politics of energy. I hold a BA in Political Science and MA in Theological Studies from the University of St. Thomas. Prior to a career in oil and gas journalism, I was a Roman Catholic priest serving churches in the Houston area. I also taught high school for a year in Oakland, California, and worked for two years in retail management. Among my other areas of interest are political philosophy, religion and society, culture and the arts, and philosophy.