Norway Increases Oil and Gas Drilling as Oil Prices Stabilize

July 1, 2015Norwayby EW News Desk Team

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According to recent reports from the government, Norway ramped up oil and gas production, increasing 2.4 percent year-on-year last month. Oil prices have gone up 25 percent since early 2015, giving more companies leeway to commence drilling. Natural gas sales amounted to 307 billion cubic feet, which is an improvement from the previous month.

Though Norway’s economy is dependent on the oil and gas industry, there is no denying that energy is the primary reason behind the Scandinavian nation’s history of economic prosperity, including the weathering of the financial crisis. Norway discovered oil in the North Sea in the 1960s, allowing the government to set up a sovereign wealth fund to enhance the economic well-being of the nation. However, oil prices must remain higher to make production lucrative, and trouble for Norway started when oil prices dipped in 2014. Oil prices dipped 40 percent since 2014, affecting many economies that depend on high oil prices to meet budget needs. Many firms have had to make cutbacks, but some still intend to explore offshore drilling projects in Norway, and more investments are expected in offshore ventures.

Norway is getting lucky as more companies are interested in drilling in the North Sea, and the region is considered a hotspot among the international energy sector. This comes as good news to Norway, a country that had to cut interest rates in response to economic shortfalls. Norway issued 54 drilling licenses in January, and oil regulator Norwegian Petroleum Directorate has set a target of adding five billion barrels of oil to national production. Experts expect that drillers will start working on the Johan Sverdrup field by 2019, which is considered the fifth most profound discovery in the Norwegian continental shelf, and state oil giant Statoil notes that Johan Sverdrup will make up 25 percent of oil production from the Norwegian continental shelf.

All of this is good news for Norway, but the country still has hurdles to overcome when it comes to its energy sector. Forecasters note that production could still fall as much as 15 percent in 2015, with more slowdowns expected for the year after. Also, oil prices are still too low for Norway to break even, and investments are expected to fall as low as 18 percent compared to last year. Analysts expect 2016 to be a better year for Norwegian drilling, increasing to 1.4 percent, as more companies engage in exploration and development.

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