Norwegian Exploration Drilling at 14-Year Low
Oil and gas firms are due to drill only 30 exploration wells off Norway in 2020, representing a 14-year low and less than half the amount in 2019, the Norwegian Petroleum Directorate (NPD) said in a report published October 27.
The NPD originally forecast that 50 wells would be sunk this year, before the coronavirus pandemic and subsequent spending cuts by operators. It lowered its count estimate to 40 in April.
"The decline in demand for oil and lower prices have led oil companies to reduce their exploration budgets for the year and postpone a number of exploration wells," the NPD said.
A lack of new discoveries today could have serious consequences in the long term, the directorate warned.
"Exploration needs to continue at a high pace across the entire shelf, particularly in areas where the infrastructure has a limited lifetime... Without new discoveries, oil and gas production could decline rapidly after 2030," the NPD said.
Around 25% of total resources on the shelf are yet to be proven. Undiscovered resources are primarily in areas opened for petroleum activities in the North Sea. In the Norwegian Sea some 65% is in opened areas, while in the Barents Sea there are only 45%. Average unit costs for discoveries between 2009 and 2019 were $25/barrel.
"If we can keep the costs at about this level, future exploration will be profitable even with low oil prices," the NPD said, predicting oil prices to reach $50/b in 2030.
Norway has attracted bids from 33 companies in its latest annual Awards in Predefined Areas (APA) licensing round, with awards due in early 2021. The country also holds frontier licensing rounds on a less regular basis, inviting offers for less explored area where drilling is higher risk but can potentially result in large, play-opening finds. Its petroleum ministry in June proposed 136 blocks for the frontier round, including eight in the Barents Sea.