Norway Faces Up to Harsh Conditions

Abstract

Offshore Norway is an unlikely spot for optimism. The continental shelf is home to a mature basin, with harsh sea conditions, a reputation for high costs, and an exploration frontier well north of the Arctic Circle. Last year’s version of low oil prices, when benchmark crudes traded for around USD 50/bbl, led to news stories in Norway pointing out that the shares of the 10 largest local oil-industry-related companies, excluding Statoil, were worth less than the 10 biggest aquaculture companies. While raising salmon is expected to grow into a big business, with big oil industry suppliers such as Kongsberg working on high-tech tools to raise millions of fish, those working in the oil business are not talking about a career change. “Oil [/bbl] is selling for the same prices as 4.5 kilo salmon. We could all start farming salmon, but I do not think so,” said Arve Iverson, ROV operations manager for Oceaneering, at the recent Subsea Valley Conference in Oslo. The show put on by the organization created to increase the visibility of the engineering-driven oil industry in southeast Norway, also amounted to a rally in support of the future of oil offshore Norway, and the global markets these companies_serve. Eldar Sætre, the chief executive officer (CEO) of Statoil, pointed out that the national oil company has lowered its average break-even cost for new projects from USD 70/bbl to USD 40/bbl, and emphasized that the bulk of the improvement was in savings that will remain after supplier discounts are gone. The themes of standardization, simplifying requirements, and working together were common ones when hearing from oil industry experts. The test of whether the Norwegian industry can deliver on its goal of profitably producing oil in a era of low prices, is the Johan Sverdrup field, a multibillion-barrel find which is moving forward in the midst of the slump, showcasing innovations backed by the Norwegian government and Statoil.