According to the Norwegian Offshore Directorate's projected scenarios leading up to 2050, the difference between high and low production of oil and gas can amount to nearly an entire government pension fund.
Norway still has extensive oil and gas resources on the Norwegian continental shelf (NCS). This can provide a basis for high levels of production, export and value creation for the broader society for many years to come, according to the new resource report. However, this potential future will not simply materialize on its own. The Norwegian Offshore Directorate expects total production on the NCS to decline after 2025.
"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," says Kjersti Dahle, Director technology, analysis and coexistence.
Oil and gas leading up to 2050
The Directorate has prepared three potential scenarios for the overall production of oil and gas leading up to 2050. All these scenarios indicate a decline in production. How fast that will unfold depends on a number of factors, such as the pace of exploration activity and technological development.
"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," Dahle says.
The production decline evident in all three of these scenarios is in line with successful follow-up of the Paris Agreement.
In order to maintain the level of activity and production over time, we will need to explore for more/additional resources, both close to infrastructure and in more frontier areas. Increased knowledge, better data coverage, fresh work methods and emerging technology open up new exploration opportunities and could result in more profitable discoveries in the years to come.
Exploration is Profitable
The Norwegian Offshore Directorate conducted an analysis of exploration activity over the last 20 years which shows that exploration for oil and gas on the NCS contributes immense value creation for society. This translates into more than $190 billion (net present value). Total value creation from discoveries made amounts to more than three times the cost spent on exploration in this period.
"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," Dahle says.
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