Norway’s Upstream Valuation Climbs

Norway’s petroleum and energy ministry said June 12 that the government's direct financial involvement in the petroleum sector (SDFI) was valued at Nkr 1.093 trillion ($135.3bn) at January 1 2018, an increase of Nkr 283bn (or 35%) over the two years since it was last valued in 2016, according to a valuation by Rystad Energy.

Reduced costs, higher expected gas prices and a significant upward adjustment of expected production are factors that contributed to the increase, said the ministry.

The Troll field alone represented 40% of the total SDFI valuation; the state (through Petoro) has a majority 56% stake in the giant gas and oil field.

"The report also shows that the SDFI portfolio has a long-term perspective, although production of oil and gas is expected to decline from the mid-2020s. It is therefore important that most of the resources in the well-known fields are produced, while facilitating continued active exploration on the Norwegian continental shelf," said petroleum minister Terje Soviknes.

The valuation of the SDFI portfolio is part of the ministry's follow-up of SDFI, and of Petoro which takes care of the SDFI on behalf of the state. The report from Rystad Energy can be found here.

Its English summary said that, of the Nk 1.093 trillion valuation, 92% came from fields, where Troll, Johan Sverdrup, Ormen Lange and Oseberg are the most important, 3% came from discoveries with Wisting as the most important, 0.5% from risked exploration prospects, and 5% from infrastructure and other elements, of which Petoro’s interest in subsea pipe system Gassled is the most important.

Of the fields in production, discoveries and exploration prospects, about 76% of the value is in the North Sea, the rest is from the Norwegian Sea and Barents Sea.

About 70% of the value is from cash flows from the next decade, with 30% for the later period. The SDFI-portfolio’s share of Norwegian oil and gas production was 27% in 2017. It is not fully exposed to all discoveries expected to drive Norwegian offshore growth 2025. As a result, SDFI’s share of total Norwegian production is expected to decline to 23% in 2025.