Norway is the largest producer of oil and gas in western Europe. The petroleum industry (including supporting industries) contributes 28 per cent of Norwegian Gross Domestic Product and 40 per cent of state revenues.
The Norwegian petroleum industry like the Australian offshore petroleum industry is mature to late-life.
Norway’s sovereign wealth fund, which is funded from state oil and gas revenues, was established in the 1990s. The first transfer from state oil and gas royalties into the fund was made in 1996. The sovereign wealth fund today holds assets valued at AUD1.6 trillion and is the largest sovereign wealth fund in the world. The fund’s portfolio includes global investments in bonds, equities and unlisted entities. About two-thirds of the funds’ value are the return on investments.
The first oil discovery in the Norwegian sector of the North Sea was made by Phillips Petroleum in 1969, with production from the Ekofisk field commencing in 1971. Natural gas production from the Ekofisk field commenced in 1977 with exports by pipeline to Germany.
Since petroleum activities began in the 1970s, liquids production from the Norwegian Continental Shelf has totalled 5 billion standard cubic metres (scm) of oil equivalent.
Proven reserves of oil and gas have been declining since 2000 and 2013 respectively.
The Norwegian Petroleum Directorate estimates the remaining liquids reserves and resources to be between 2.9 and 5.9 billion scm of oil equivalent.
Recent oil discoveries have tended to be smaller as a result of infill drilling in more mature areas of the Norwegian Continental Shelf.
The results of exploration activity in the large areas of the Norwegian Continental Shelf that have not yet been extensively explored will determine how quickly production declines after 2030.
The largest petroleum producer in Norway is Equinor, a company listed on the Oslo and New York Stock Exchanges. Equinor is 67 per cent owned by the Norwegian Government and is responsible for 70 per cent of the total Norwegian oil and gas production.
International companies were initially responsible for oil and gas exploration and production. Equinor was established in 1972 as the Norwegian State Oil Company, Statoil to participate in oil and gas project and to develop a Norwegian industry capability.
By the early 2000s, the focus of Equinor, BP Aker and ConocoPhillips the larger companies with activities on the Norwegian Continental Shelf had shifted to larger more prospective development targets.
To encourage the development of resources on the Norwegian Continental Shelf by smaller companies, changes to the fiscal regime for petroleum activities were made.
These include the reimbursement of 78 per cent of exploration costs incurred in a year, in the following year (Exploration Reimbursement Agreement of 2005).
This arrangement applies only to companies that do not have a taxable income from offshore petroleum production. This fiscal regime has been applied since 2005 (Global Legal Group).
There are now 23 companies (including Equinor) that are titleholders on the Norwegian Continental Shelf, with a further 13 companies engaged in exploration activity only.
Equinor and decarbonisation
Equinor’s decarbonisation strategy has two main pillars. The reduction in emissions from its oil and gas activities and increasing investments in renewables. Equinor is seeking to leverage its petroleum industry experience to support the development and operation of offshore wind farms. This includes floating wind farms.
Equinor plans to direct more than 50% of investments to renewables and low carbon solutions by 2030.
The development of offshore wind farms has the potential to contribute to a reduction in western Europe’s reliance on imported energy.
Equinor is strongly placed to contribute to this investment.
Equinor has invested in existing wind farm projects and aims to have 12-16 gigawatts
Key industry data
Key Norwegian production data includes2:
- 2.2 per cent of 2021 global oil production
- 2.8 per cent of 2021 global gas production
- 59 per cent of west European oil production
- 54 per cent of west European gas production.
Key Norwegian industry data includes:
- 31 exploration and 175 development wells drilled in 2020
- 80 fixed installations/platforms
- 50 drilling rigs
- 25,000 employees
- 15,400 km of subsea pipelines
- 94 fields in production at the end of 20213.