$1.42 trillion at stake as oil & gas production ebbs away: Norway urged to pick up the pace of exploration and tech advancement

While fossil fuel production is expected to shrink over time to reach the net zero by 2050 vision, the Norwegian Offshore Directorate (NOD), reporting to the Ministry of Energy, has come up with three scenarios, showcasing a decline in oil and gas output and financial impacts, with over $1.42 trillion (NOK 15 trillion) at risk of being lost if Norway does not step up its search for remaining hydrocarbon resources on the Norwegian Continental Shelf (NCS) and take advantage of new technology to boost production levels.

Even though Norway is said to have extensive oil and gas resources on the NCS, which could provide a basis for high levels of production, export, and value creation for many years to come, according to the Norwegian Offshore Directorate‘s new resource report, the European country is also facing the possibility of giving up the equivalent of nearly an entire government pension fund, if it does not select the right way forward.

The three projected scenarios up to 2050 spotlight the difference choosing between high and low oil and gas production could make, even though the NOD still expects the total level to decline on the NCS after 2025. These scenarios show that the speed at which the output curbs unfold depends on several factors. Ramping up exploration activity and technological development is believed to be the key to unlocking longer benefits of higher oil and gas production.

Kjersti Dahle, Director of Technology, Analysis, and Coexistence, highlighted: “This is why we’ll need to ramp up exploration and investment in fields, discoveries and infrastructure moving forward in order to slow the decline in production. A failure to invest will lead to rapid dismantling of the petroleum industry.

“The scenarios reveal stark differences in future value creation and future government revenues from the petroleum activities. The Norwegian Offshore Directorate’s calculations show a difference in net cash flow of about NOK 15 thousand billion between the high and low scenarios.”

Based on the Norwegian Offshore Directorate’s analysis of exploration activity over the last 20 years, oil and gas exploration activity is perceived to be “extremely profitable,” as it translates into more than NOK 2 trillion (almost $189.4 billion). Figures indicate that the total value creation from discoveries amounts to more than three times the cost spent on exploration in the period.

Therefore, the NOD has underscored the need to maintain the level of activity and production over time, exploring additional resources – both close to infrastructure and in more frontier areas. In light of this, a rise in knowledge, better data coverage, fresh work methods, and emerging technologies are seen as a way to open up new exploration opportunities and could result in more profitable discoveries over the coming years.

“Norway and the NCS are still in a prime position to remain a competitive producer of oil and gas for many years to come, because we have substantial remaining resources, low emissions, well-developed infrastructure, low operating costs and stable framework conditions,” emphasized Dahle.

Intending to up the hydrocarbon exploration ante off the coast of Norway, the country’s Ministry of Petroleum and Energy launched a few months ago the award in pre-defined areas 2024 (APA 2024) round, including blocks in the North Sea, Norwegian Sea, and the Barents Sea.

The Norwegian Offshore Directorate previously outlined that it would like to see greater interest and engagement from oil and gas players in exploring frontier areas to bring more additional resource potential to market.

Recently, two Norwegian firms wrapped up drilling operations in the Barents Sea, with Aker BP’s drilling efforts leading to a gas discovery while Equinor had no such luck as its well was dry.