A panel of Norwegian oil and gas experts has called for changes in the country’s offshore sector, which has been struggling to experience growth in production since 2010.
With successive declines in total petroleum production of 4% and 5% in 2010 and 2011 respectively, the creation of new discoveries alongside improvement in recovery over existing fields is crucial for the sector, reported Wall Street Journal.
The panel expressed concerns over the rising costs of offshore drilling in the country and called for changes in safety rules and workers’ conditions, which it believes would save up to NOK1,000bn ($167.5bn) and enable increased oil and gas production.
Commenting on the existing condition of the sector, the panel’s leader, Eivind Reiten, told Dow Jones Newswires: "The production on the Norwegian continental shelf is in a heavy fall, and we have serious trouble with the cost curve on the shelf."
Norway’s Minister of Petroleum and Energy, Ola Borten Moe, has described drilling as the most expensive part of petroleum extraction and said that cost savings must be made.
According to the Norwegian Petroleum Directorate, investments into the country’s offshore activity are at an all-time high, with licensees looking to invest NOK96.3bn ($16.2bn) in 2013 on the drilling of production and exploration wells.
When compared with the UK, the cost of rig operations in Norway is 40% higher, mainly owing to personnel costs of about $50,000 to $75,000 more per day on a Norwegian rig, the panel noted in a report.
The panel suggested that Norway could modify some regulations to bring them more in line with those in the UK, to help move rigs between the countries easily without excessive spending.
Total SA (TOT) Norwegian unit external affairs director Bjorn Are Nesgaard pointed out that moving a rig from the UK to Norway is often very costly. In some cases nearly $100m is spent on modifying a rig for use in Norway.
"It should be possible to harmonise the practice of the rules," Nesgaard said.
The panel further suggested a 30% cut in rig costs to save NOK500bn ($84bn), and use of cheaper rigs to increase production of higher-cost marginal oil discoveries, estimated to be in the range of NOK50bn ($8.4bn) to NOK500bn ($84bn).
Furthermore, the panel called for drilling workers to spend extra time offshore, raising concerns from union bodies over their safety, the news agency reported.
Labelling the proposals a serious threat to the country’s health, environment and safety rules, Roy Erling Furre, second deputy leader at Norwegian offshore union Safe, said: "The death risk is four times higher in the UK sector than on the Norwegian shelf."
"A harmonisation between Norway and the UK worries me, especially in the wake of Deepwater Horizon," Furre added.
