News of Norway, issue 1, 1996
Two new oil fields that came on stream last fall, the Troll Oil development west of Bergen and the Heidrun field northwest of Trondheim, added more than 400,000 barrels of daily production. However, unexpected contributions from older fields account for most of the recent production increases.
New technology and better understanding of undersea geology have enabled oil companies to extract more resources than planned, causing production levels from old fields to stay at very high levels much longer than anticipated. This has substantially improved the economics of the fields to the satisfaction of both the owners and the Norwegian Treasurer. But higher recovery rates and unexpected reserve additions are accompanied by great uncertainty of how the big oil fields will behave as they enter their final years of production.
Will the high sustained production level be followed by a steep decline or by the normal gradual phase-out? Nobody can tell for sure, and with three or four very large and mature fields accounting for a major share of Norway's production, companies wisely hold their breath. Despite this uncertainty, few predict that a production decline for Norway is imminent. The combined effect of new fields, improved recovery and reserve additions should maintain Norway's production levels for several years.
The Troll Oil development is an excellent example of how technology has developed during the last decade. Nine years ago, the oil reserves under the giant Troll natural gas field where considered of no value. Technological advances, particularly in the area of horizontal drilling, now enable the operator, Norsk Hydro, to extract a billion barrels of oil from this field.
In the longer term, Norway relies on exploration successes to maintain the oil industry. According to the Norwegian Petroleum Directorate, last year's 21 exploration wells yielded only nine relatively small discoveries with a total of 350 million barrels of recoverable oil. Compared to a production of 1,000 million barrels the same year, the overall picture would be darker had it not been for an addition of 1,100 million barrels due to upward revisions of old discoveries.
Small discoveries however, do not discourage the companies from drilling. The Directorate expects more wells in 1996. New exploration techniques, such as advanced seismics and computers, aid exploration and make drilling more targeted.
The Ministry of Industry and Energy is now finalizing the award of new exploration licenses. This, the 15th round of licensing, focuses on new geology and deep water in the Norwegian Sea off Northern Norway. The licensing round has attracted great interest in international circles. Nineteen companies applied, including six major U.S. corporations. The efforts of all six U.S. bidders were rewarded when the Ministry issued their verdict on January 22. Some years will pass, however, before production from these areas can start, and hopefully this new area can extend the oil age of Norway.