Norway has 10 billion barrels of oil equivalent of discovered hydrocarbons that are yet to be developed, according to new analysis released Tuesday at Stavanger’s ONS 2014 conference by Wood Mackenzie. Wood Mackenzie said that, despite being at different stages of evaluation, facing intense investor scrutiny and considerable technical and commercial challenges, more than 60 percent of these resources could be commercialized – potentially adding $106 billion to Norway’s oil and gas industry revenues.
The oil and gas industry research firm said that the 10 billion barrels of oil equivalent of undeveloped resources are held with 206 discoveries – ranging in size from under one million boe to the giant 2.4 billion boe at Johan Sverdrup – and spread across the Norwegian Continental Shelf. James Webb, Wood Mackenzie’s upstream analyst for North West Europe, commented: “We consider 4.8 billion boe likely be economic, 1.6 billion boe potentially economic and the remaining 3.6 billion boe not commercial and therefore will remain undeveloped.
From this we estimate the volumes in the likely and potentially economic discoveries represent $22 billion (NOK 135 billion) of potential value for companies in the sector and $84 billion (NOK 514 billion) in tax revenue alone for the Norwegian government – excluding the profits of Statoil and the State Direct Financial Interest (DFI).” However, Webb warned that there are significant challenges that will need to be overcome in order to maximize the value of these projects. “Not all undeveloped discoveries will reach commerciality.
A considerable number of technical and commercial challenges exist that could threaten the development of these discoveries. Low reserves, lack of infrastructure and/or complex geology are just some examples of the technical obstacles faced,” he said. “Commercially, the global upstream industry faces an extremely difficult economic environment. Investors are increasingly demanding bigger dividends and a better rate of return.
As a result many companies have committed to stricter capital discipline and are intensely screening projects based on financial criteria. Capital intensive projects are particularly being scrutinized. This means more difficult projects could be delayed, and in some circumstances will simply remain undeveloped.” Webb also pointed out that Norway’s undeveloped resources account for much of the remaining value for several companies, including Lundin Petroleum, Det Norske and Faroe Petroleum.
“This creates an incentive to quickly commercialize the finds and bring them on-stream. However we see increased cooperation between the companies, state DFI, and Norwegian government as vital in order to achieve the $106 billion prize (NOK 649 billion),” he said.