Oil companies operating on the Norwegian Continental Shelf (NCS) were this morning warned that cost cutting should not lead to fewer projects and leaving behind economically viable fields, Norway’s Minister of Petroleum told ONS conference delegates in Stavanger this morning.
Tord Lien, Minister of Petroleum and Energy (pictured right), said that after 40 years of activity, the Norwegian Continental Shelf was still attractive and held a promising future. “Taking advantage of the remaining potential requires active work from operators on the NCS,” he said. But he added: “Producing the easy oil only is not in accordance with good resource management and the license to operate.
“Cost cutting and capital discipline shouldn’t lead to leaving resources in the ground. If cost cutting leads to economically viable resources are left in the ground this is not in compliance with the social contract to operate on the NCS. Fewer projects might have ripple effects through the supply chain. It might result in a loss of resources and capacity that might be needed in the future.”
Lien’s reference to cost cutting by operators comes as the industry has faced increasing costs, leading to Statoil setting a target for 20-30% cost reductions. Yesterday, at ONS, some of the reasons behind cost increases were outlined during multiple sessions at the ONS conference. Read more here.
Lien went on to talk about the future of the Barents Sea region, dismissing claims that it would be dangerous for operators to work in this region, citing existing developments already operating in the area.
He also promised a predictable and stable framework for the industry. But, this was challenged by Philip Lambert (pictured left), CEO at Lambert Energy, a consultancy.
He said Norway was an attractive place to do business. “There are only two triple A-rated oil-exporting countries now, Canada and Norway. Until recently, my own country, the UK, was too but the UK lost its ability to read a balance sheet about 10 years ago,” he said, discussing where investors might want to put their cash.
But, he said: “I worry about complacency and 6 trillion of private equity sitting on the NCS. The tax system is stable, yet there was an unnecessary tinkering with the tax system which rendered some projects unviable.” He said, while being an environmentalist, putting stringent requirements for power from shore on projects like Johan Sverdrup were questionable.
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