Offshore Norge – Climate and Environmental Report 2024

In 2023, total petroleum production from the Norwegian continental shelf amounted to approximately 233 million Sm³ o.e. , This is roughly at the same level as in 2022 as shown in Figure 1.. Of this, oil accounted for approximately 104 million Sm³ o.e., gas 117 million Sm³, and NGL 12 million Sm³ o.e.

Figure 1: Historical petroleum production on the NCS

The gas price in Europe has dropped significantly from the historically high levels in the autumn of 2022. Relatively low gas demand throughout the previous winter, combined with high imports of liquefied natural gas (LNG), has contributed to a stable high level in European gas storage. This has reduced uncertainty in the market. However, Europe remains heavily dependent on importing natural gas, either through pipelines or in the form of LNG. Since Russia's invasion of Ukraine in February 2022, Russian pipeline gas to the EU has largely disappeared. Much of this loss has been replaced by increased imports of LNG, but increased and stable deliveries of Norwegian pipeline gas have also been crucial.

Despite less uncertainty in the market compared to autumn 2022, gas prices remain volatile and tends to react sharply to global events that may threaten supply. This was recently exemplified by increased tensions between Iran and Israel and fears regarding LNG transport through the Strait of Hormuz, combined with increased demand in Asia. Many analysts expect that the global gas market will be tight in the years to come.

Oil prices have fluctuated significantly throughout the year in line with updated expectations for economic prospects, announced production cuts, and geopolitical events. Increased tensions in the Middle East have heightened uncertainty in the market but have not yet caused major disruptions in trade flows. Russian oil exports have remained high in recent years, with a large portion now being exported to China, India, and Turkey. In Europe, increasing import shares are seen from, among others, Norway and the USA.

The International Energy Agency (IEA) estimates a growth in global oil demand of 1.2 million barrels per day (mbbl/d) in 2024 and 1.1 mbbl/d in 2025. This represents a decrease in the growth rate of oil demand compared to 2023. At that time, the growth in oil demand was 2.3 mbbl/d, primarily due to developments in China and strong growth within the petrochemical industry. The declining growth rate is related to the fact that the economic recovery after the pandemic is largely complete, combined with a steadily growing electric vehicle fleet and increased focus on energy efficiency.

Global upstream investments in oil and gas fell sharply in 2020 due to the COVID-19 pandemic and the drop in oil prices. Since then, investments have gradually picked up in line with the price developments for oil and gas. On the NCS, the development has been more stable, largely due to the temporary changes in the petroleum tax regime.

Upstream investments in offshore oil and gas, both globally and on the NCS, are expected to remain at a higher level going forward. This contributes to increased order intake in the number of supplier segments.

The development is also reflected in the results from Norges Bank's latest regional network reports, where oil suppliers generally report expectations of increased activity and high-capacity utilization. In NHO's member survey, a clear majority of Offshore Norge's members, both operators and suppliers, assess the market situation and outlook as positive. There is, and may continue to be, strained capacity within several supplier segments in the coming years, but the effect is considered to be temporary.

Offshore Norge presented its updated investment analysis for the NCS in December 2023. The analysis includes estimates for investment levels on the NCS over the next five years. In 2024, investments are estimated to total NOK 240 billion.

Between 2020 and the end of 2022, a number of development projects were sanctioned. During the period, development plans were submitted for 18 new developments and 13 plans for further development of fields in production. In addition to these development projects, decisions were made regarding investments in projects for enhanced recovery, etc., from existing fields. These projects will fall under the temporary changes to the petroleum tax regime introduced in the summer of 2020 and contribute to a high level of activity in the coming years.

The phasing of investments is still somewhat uncertain, but a large portion of investment activity is concentrated in the years 2023–2026. From 2024, investments are expected to gradually decline towards 2028 as these projects are completed. New projects, both standalone development projects and smaller tie-backs, will help maintain the investment level throughout the period.

In 2023, 35 exploration wells commenced drilling (23 wildcat wells and 12 appraisal wells), as shown in Figure 2. A total of 15 oil and gas discoveries were made, providing a gross resource growth of 52 million Sm³ o.e. Between 40 and 50 exploration wells are expected to be drilled in 2024.

In the awards in predefined areas (APA) 2023, 24 companies were awarded shares in 62 production licences. The 62 production licences are distributed as follows: 29 in the North Sea, 25 in the Norwegian Sea, and 8 in the Barents Sea.

The Ministry of Energy submitted a proposal for the announcement of APA 2024 for consultation on January 31. The Ministry stated that APA 2024 will be conducted according to the usual schedule.

As a result of the budget agreement between the Socialist Left Party (SV) and the Norwegian government for the 2023 state budget, a 26th licensing round will not be conducted during this parliamentary term.

Figure 2: Exploration wells started on the NCS (Source: the Norwegian Offshore Directorate).