A milestone was reached for the petroleum industry on the Helgeland coast when the Skarv field came on stream in 2012/2013. A new shift lands at Skarv.
(Photo: BP, Kjetil Alsvik)
Figure 3.1 Value creation in selected industries 2012
(Source: National Accounts, Statistics Norway)
The figure is updated in August 2013
Figure 3.2 The largest oil exporters (oil includes and condensate) and gas exporters in 2011
(Source: KBC Market Services)
The petroleum activities in Norwegian society
The petroleum activities have been crucial for Norway’s financial growth, and in financing the Norwegian welfare state. Over more than 40 years, petroleum production on the shelf has added more than NOK 9000 billion to the country’s GDP. In 2012, the petroleum sector represented more than 23 per cent of the country’s total value creation.
Currently, 76 fields are in production on the Norwegian continental shelf. In 2012, these fields produced about 1.9 million barrels of oil (including NGL and condensate) per day, and about 111 billion standard cubic metres (Sm3) of gas, giving Norway a marketable petroleum production totalling 225.14 million Sm3 of oil equivalents (o.e.). Norway is ranked as the seventh largest oil exporter and the fourteenth largest oil producer in the world. In 2011, Norway was the world’s third largest gas exporter, and the world’s sixth largest gas producer.
The State receives substantial income from the petroleum activities. Tax from the production companies and direct ownership (SDFI) ensures that the State receives a large share of the value created by the petroleum activities. The State’s income from the sector amounted to about 30 per cent of total State revenue in 2011. Figure 3.4 shows the payments from the industry.
The State’s income from the petroleum activities is transferred to a separate fund, the Government Pension Fund – Global. In 2012, transfers to this fund totaled more than NOK 270 billion. At the end of 2012, the fund was valued at NOK 3 816 billion. This corresponds to more than NOK 750 00 for every Norwegian citizen.
In 2012, crude oil, natural gas and pipeline services represented slightly more than half of Norway’s export value. The export of petroleum products amounted to more than NOK 600 billion in 2012.
Since the start of the petroleum activities on the Norwegian continental shelf, vast amounts have been invested in exploration, field development, transport infrastructure and onshore facilities. The investments in 2012 amounted to nearly 29 per cent of the country’s total fixed capital investments.
Figure 3.3 Macroeconomic indicators for the petroleum sector 2012
(Source: Statistics Norway, Ministry of Finance)
Figure 3.4 Net cash flow to the State from the petroleum activities
(Source: State Accountsw)
The road ahead
Following several years of decline in total petroleum production, it is now expected that production will increase slightly in the coming years, before ebbing off again in a more long-term perspective. The relationship between production of gas and oil, including NGL and condensate, is expected to remain relatively stable in the future. Over the longer term, the number of new discoveries and their size will be decisive for the production level. So far, about 44 per cent of the estimated total recoverable resources on the Norwegian continental shelf have been produced. The remaining recoverable resources on the shelf constitute a significant potential for value creation for years to come.
The investment level on the Norwegian shelf has been high in recent years. In 2012, more than NOK 175 billion was invested, including investments related to exploration. The operating costs in 2012 amounted to about NOK 60 billion. Both investments and operating costs are expected to remain high in the years to come. The activity level on the shelf will represent a significant market for the supplier industry for many years.
Figure 3.5 Net cash flow to the State from the
petroleum activities 2011 (billion NOK)
(Source: Norwegian Public Accounts)
The demand from the petroleum industry has been and is very important for the activity in several industries around the country. Statistics Norway has analysed the effects this demand has had on among other things, employment in Norway. On the basis of direct and indirect deliveries to the petroleum industry, the agency has prepared an estimate of the scope of employment that can be related to the petroleum industry. For 2009, the estimate was 206 000 jobs. The deliveries to the petroleum industry come from various parts of Norwegian industry and commerce. The employment effects therefore cover a broad range of industries.
Ripple effects of the petroleum activities
The development of new discoveries must create the largest possible value for society as a whole, as well as provide local and regional ripple effects.
When developing discoveries, it is important to find good socioeconomic development- and operation solutions. The experiences from developments such as Skarv, Ormen Lange, Snøhvit and Goliat show that new, major developments provide ripple effects locally and regionally regardless of development solution. One important condition for achieving good ripple effects is that local and regional industry and commerce are able to utilise the business opportunities offered by a development in the vicinity.
The Norwegian supplier industry
The petroleum resources on the Norwegian shelf have laid the foundation for a highly competent and internationally competitive oil and gas industry. Today, the supplier industry delivers advanced technology, products and services for the Norwegian shelf and for international markets. The industry is active within exploration activity, new developments, operations, maintenance, modifications and abandonment of fields. Some companies concentrate on one of these markets, while others have activities in several parts of the value chain. The Norwegian offshore industry increased its turnover from 248 to 361 billion NOK from 2009 to 2011. This constitutes a growth of about 48 per cent. The petroleum industry also provides a strong impetus to innovation and technological development within other Norwegian industries.
A successful international industry
Over the last decade, several Norwegian suppliers have gained a strong international position. This is a direct result of the will to develop and use new technology on the Norwegian shelf. The interaction between oil companies on the shelf, the supplier industry and the research environments has yielded good results.
Figures from Rystad Energy indicate that in 2011, Norwegian petroleum-related companies had sales totalling NOK 152 billion abroad, compared with NOK 118 billion in 2009.
The INTSOK foundation was established by the authorities and the industry in 1997 in an effort to strengthen the Norwegian petroleum industry internationally. Together, they work to ensure that Norwegian suppliers are able to win assignments in international markets.
Figure 3.6 Size of the Government Pension Fund - Global
as at 31 December 2012 and as part of GNP
(Source: Statistics Norway, the Central Bank of Norway)
The energy market
Securing access to energy is important to all countries. Through increased use of energy, manpower can be released from low- productive manual labour. The most important driving forces behind the increased energy demand are economic growth and population growth. In the future, the increased demand will mostly come from countries outside the OECD.
Oil accounts for about one-third of the world’s total energy consumption, and more than half of the oil consumption takes place in the transportation sector as fuel. Oil is also used as a raw material in industry and, to some extent, in combined heat and power production. The demand for oil is rising, particularly in countries such as China, India and countries in the Middle East. The world’s largest oil producers are Saudi Arabia, Russia and the USA. Much of the remaining oil resources are located in the Middle East, where the largest producers have joined forces with some other producing countries in the OPEC production cartel. The price of oil is determined by supply and demand in the world market. To a certain degree, OPEC can influence the price by increasing or decreasing supply.
Natural gas accounts for more than 20 per cent of the world’s total energy demand. The most important markets for natural gas are in Europe, Asia and North America. Solutions for transporting gas as LNG (liquefied natural gas - refrigerated gas) on ships have made the market for natural gas more global. Natural gas is generally used in the household sector for heating and cooking, in industry and for production of electricity. Over the last ten years, the gas market has undergone significant changes. The possibility of recovering unconventional gas has considerably increased the world’s gas reserves, and the growth in LNG supply has made gas available in new markets.
Figure 3.7 Historical production of oil and gas,
and prognosis for production in coming years
(Source: The Norwegian Petroleum Directorate)
Figure 3.8 Production prognosis
(Source: The Norwegian Petroleum Directorate/Ministry of Petroleum and Energy)
Figure 3.9 Historical investments (excluding investment in exploration)
(Source: The Norwegian Petroleum Directorate/ Ministry of Petroleum and Energy)