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Norway could open up ‘new oil province’, report says

Westcon yard in Olen, Norway
Westcon yard in Olen, Norway

Norway’s upstream sector will stage a recovery this year thanks to an upturn in exploration activity, large financial investment decisions (FIDs) and company consolidations, a new report said.

Energy consultancy Wood Mackenzie (WoodMac) said the sector is “up and out of bed” again following a painful 2016, when investment dropped to a 10-year low.

But WoodMac said there were “rays of light” last year as companies cut costs and kept production levels high, while M&A activity rose.

Norway’s explorers are expected to lead the recovery. WoodMac expects more discoveries in 2017 than in any other year since 2010.

WoodMac analyst Neivan Boroujerdi said: “Of the 35 exploration wells we expect to be drilled offshore Norway this year, over a third will be in the Arctic Barents Sea, including the first in the formerly disputed area, bordering Russia.

“A major discovery would open a new oil and gas province in Norway.”

WoodMac predicts there will be FIDs on three Statoil-operated developments − Snorre Expansion, Njord Future and Snilehorn.

They are expected to reap reserves of around 400 million barrels and bring investment of $6billion.

Mr Boroujerdi said the FID for the Statoil operated Johan Castberg field could slip into 2018.

He also said M&A activity could reach record levels this year: “A key theme will be the divestment of operated assets, which will allow Majors to streamline their business and meet lofty divestment targets.

“We could also see a continuation of the creative corporate equity deals we saw in 2016, which allowed cash-conscious buyers to acquire high quality assets.

“Large European based-independents are expected to lead the charge of buyers, but we also expect private equity to step up. Having sat largely idle outside North America, Siccar Point’s acquisition of OMV’s UK subsidiary marked a change in sentiment which will open the floodgates for more private equity-backed vehicles to enter the fray.”

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