The Norway oil and gas upstream market is expected to register a CAGR more than 2% during the forecast period, 2020-2025. Major factors driving the market are the increasing development of new oilfields and the lower breakeven prices. However, the divestment of government funds from the upstream oil and gas sector can act as a restraining factor for the market growth.

  • Upstream companies see drilling in the Lofoten islands as crucial for maintaining the petroleum production level in the coming years. Around 1-3 billion barrel of crude oil is estimated to be present beneath the island. Moreover, around two-thirds of Norway’s undiscovered resources, especially gas, are estimated to lie in the Barents Sea. As a result, exploration activities in the region are expected to shift toward the Barents Sea.
  • The discovery of new small oilfields provides an opportunity for the upstream oil and gas market in Norway
  • In 2019, the investment in the Norwegian offshore oil and gas industry (excluding exploration) was expected to increase by 13%, to more than NOK 140 billion. A number of small projects received FIDs in 2017 and 2018, and they are expected to come online by 2020.



Key Market Trends

Increasing Development of New Oilfields

  • The major oilfields in the country are reaching their maturity, and, as a result, since 2016, the oil production of Norway has declined significantly. During 2016-2018, the oil production of the country declined by about 8%, and it was expected to further decline by another 4.7% during 2018-2019.
  • However, in recent years, the country made a number of major oil discoveries. In order to offset the decline in production from mature oilfields, the upstream oil and gas companies are investing heavily in developing these new oilfields.
  • Hence, during the forecast period, the investments in new oilfields are expected to be the biggest and the most dominating driver for the upstream oil and gas market in Norway.
  • As a result of these investments, from 2020, the oil production of Norway is expected to reverse the trend and register significant growth. Some of the major fields that are expected to attract investments during the forecast period are the Johan Sverdrup oilfield, Martin Linge, Aasta Hansteen gas field, and Johan Carstberg.



Lower Breakeven Prices to Restrain the Growth of the Market

  • Prior to 2014, one of the major problems faced by the Norwegian petroleum industry was the high breakeven prices. Statoil, now Equinor, registered a negative cash flow for some of its fields in 2013, despite the high oil price of USD 112 per barrel. After the steep oil price drop, which started in late-2014, almost every oilfield in the country became unprofitable. However, during 2014-2017, many oilfields registered a drop in breakeven oil prices. As of 2018, Equinor’s breakeven oil price for its entire upstream portfolio was about USD 27 per barrel. Some of the significant drops in breakeven prices are:
  • Johan Sverdrup: The CAPEX for the development of phase 1 of the project has been reduced by about 30%, resulting in a revised breakeven price of approximately USD 15 per barrel, well below the initial estimate.
  • Johan Castberg: The initial estimate for the breakeven price for this field was USD 80 per barrel. However, as of 2018, the breakeven cost reduced by more than half, to USD 35 per barrel.
  • The drop in breakeven prices was mainly achieved by project re-engineering, efficiency gains, better expense management, and drop in oilfield services cost, due to a lack in the demand for services. This drop in breakeven prices has turned many projects profitable, which were first considered economically unviable, due to low oil prices. For example, both Johan Sverdrup and Johan Castberg, which are expected to account for a significant share in Norway’s oil and gas industry investments during the forecast period, may have been economically unviable at current oil price, with their initial breakeven price estimates.



Competitive Landscape

The Norwegian oil and gas upstream market is consolidated, and the major companies include Equinor ASA, Aker BP ASA, Total SA, ConocoPhillips, Royal Dutch Shell PLC, and Exxon Mobil Corporation.

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