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NPD warns on Norwegian development delays

Industry watchdog fears that Covid-19 will impact schedules

The Norwegian Petroleum Directorate (NPD) is concerned that restrictions due to the coronavirus pandemic will slow work at the 18 projects under development on the Norwegian continental shelf (NCS).

“Several of these developments could be delayed as a result of the Covid-19 restrictions, for example [due to] the use of foreign labour and limits on the number of people in a workplace. This could impede progress in development projects,” the NPD warns in its interim report on the first half of 2020.

The 18 projects (see Figure 1)—12 in the North Sea, five in the Norwegian Sea and one in the Barents Sea—span a range of entirely new facilities, smaller discoveries utilising existing infrastructure and improved recovery initiatives on mature fields.

But the NPD also sees more promising signals, not least project sanctions accelerated by the Norwegian government’s tax changes. As well as Norwegian producer Aker BP’s Hod redevelopment, which has already submitted its plan for development and operation (PDO), it expects to receive PDOs for the Breidablikk, Grasel and Blabjorn-Lysing fields this year.

Exploration success

The NCS saw 12 exploration wells completed in H1 2020, 10 of which were wildcats, the NPD reports. Five discoveries were made—three in the North Sea and two in the Norwegian Sea. Germany’s Wintershall Dea topped the period’s largest discovery charts, finding 4-15mn m³ oe at the Bergknapp well in the Asgard area in the Norwegian Sea.

The second half of the year has already seen a further three discoveries close to infrastructure in the North Sea. But it is not all good news. The NPD warns that only around 30 exploration wells will be drilled in 2020, fewer than previously expected, due to delays caused by Covid-19. By comparison, 58 exploration wells were drilled in 2019.

NPD exploration director Torgeir Stordal says as many as 12 exploration wells have been postponed “for operational and preparedness reasons”, with another five looking at risk. “We expect these wells to be drilled as soon as possible, and no later than during 2021,” says Stordal. On the other hand, 84 new development wells have been drilled so far this year, comparable to last year’s levels.

Production dip

The NPD has also offered the first official look at Norway’s production cut with the release of provisional June output numbers. Norway promised a reduction of at least 250,000bl/d of crude from a reference case of 1.859mn bl/d, or a maximum of 1.609mn bl/d. The NPD’s June crude figure is 1.540mn bl/d (see Figure 2), allowing it to highlight 4.1pc of headroom between its promised and actual volumes.

But its reference case is higher than crude production has been for a decade. Based on November-May average crude production of 1.720mn bl/d, the crude production taken out of the market is 180,000bl/d.

For liquids as a whole, including NGLs and condensate, this rises to 190,000bl/d, as condensate production dropped from a November-May average of 28,000bl/d to just 11,000bl/d in June. This is due to a corresponding drop in NCS gas production. Some of this is seasonal as European gas markets move into summer, but 2020 output has lagged the last three years for all three of the Q2 months (see Figure 3) due to depressed prices in destination markets.

It remains likely, though, that the Johan Sverdrup project’s over-performance can explain some of the gap between the 180,000bl/d and 250,000bl/d numbers. Although no figures are available for June, the NCS’ new star performer reached 450,000bl/d in May—not far from a revised phase 1 capacity plateau of 470,000bl/d—even as crude production on the rest of the NCS dipped from 1.35mn bl/d to 1.30mn bl/d.        

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