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Monday, July 15, 2024

Norway’s oil attracts the world

More than 50,000 energy industry players were converging on Norway’s oil capital of Stavanger this week, to meet and mingle at a time when the country’s own offshore oil and gas activity is stronger than ever. A rash of new discoveries on the Norwegian continental shelf and still-high oil prices continue to set off massive investment, while prospects for growth are mostly seen as high.

Another plane comes in for a landing at Hammerfest in Norway's booming Arctic, where Statoil's offshore gas fields and plant at Melkøya are among those fueling development and the local economy. PHOTO: Views and News

The recent discoveries of large new oil and gas sources off Norway, combined with more potential in the Arctic, has drawn enormous interest. The Offshore Northern Seas (ONS) exhibition, held every other year, could thus celebrate its 20th anniversary this year with record numbers of participants: More than 1,300 exhibitors and 50,000 registered visitors from nearly 100 countries, according to ONS organizers.

The theme is “confronting energy paradoxes,” with a long list of top international oil industry executives, analysts and political leaders getting a head start on Monday with a special seminar on how the world can balance the need for energy with climate concerns and environmental protection. The foreign ministers of Norway and Sweden and the heads of oil firms Conoco, Shell and Norway’s own Statoil were among those taking part.

The official ONS opening was set for Tuesday, when King Harald will conduct formalities and a lengthy program of speeches gets underway. Prime Minister Jens Stoltenberg was supposed to be keynote speaker, but had to cancel when he was called into an extraordinary session of Parliament in Oslo following last year’s terrorist attacks.

Statoil's stand at the last ONS exhibition in 2010: This year's conference has attracted record attendance. PHOTO: Statoil/Harald Pettersen

Meanwhile, all the others expected to arrive in Stavanger have left the west coast city bursting at the seams. Hotels are so packed that many residents are carrying on a tradition of moving out of their homes this week so they can be leased out to accommodate ONS visitors. “In the beginning, this was just good income for us,” local homeowner Kurt Harald Aase told newspaper Dagens Næringsliv (DN) on Monday. “Now it’s a good excuse to fix our place up and then spend a week at our hytte (holiday cabin).”

While ONS can be lucrative for the locals, there’s little question that the new oil boom Norway’s been seeing will be lucrative for the industry and state coffers. Brokerage SEB Enskilda recently predicted that the “oil party” in Norway will continue for many years. After interviewing officials at the world’s largest oil companies about their plans, SEB Enskilda’s analysts predict activity will increase by 12 percent, or NOK 70 billion (nearly USD 12 billion), next year.

Norway is among the areas already seeing optimistic investment, with new discoveries luring big companies back to the North Sea and now to the Norwegian Sea and the Barents. Companies like Statoil and offshore specialists like Aker Solutions, Subsea 7, PGS, Kværner and Sevan Drilling were mentioned as among SEB Enskilda’s stock favorites, according to DN.

Some caution, too
Some analysts are more cautious, with Torbjørn Kjus at DNB Markets in Oslo, predicting that oil prices will fall by 2020. Kjus, in a report delivered last week, believes the US will become more self-sufficient with its shale oil, that demand from China will slow down, that demand will also decline in the US and that motorists will have alternative fuel options. He thinks oil prices will fall from today’s level of more than USD 100 a barrel to USD 77, starting in 2013.

That would hit oil and gas industry investment in Norway, but Statoil chief executive Helge Lund doesn’t share DNB’s assessment nor do several other industry analysts.

“We get lots of analyses and I think (DNB’s) lies within the tension of uncertainty that Statoil works with,” Lund told DN. “We believe that in the long term, there will be energy price pressure upwards, with considerable swings. We’re investing more than NOK 100 billion in long-term projects. We’ll tolerate prices lower than what we see today.”

If anything, Lund worries the current boom times will make some players complacent. “It’s easy to slack off on efforts for more efficient operations and other improvements,” Lund said. “It’s easy to mask over bad work and inefficient work in times of high profitability.” The industry has created enormous value for Norway. His job is to keep creating more.

Views and News from Norway/Nina Berglund

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