Oil production on the Norwegian continental shelf has passed its peak. "Both the industry and the authorities now have to adopt new measures for continued growth," said Tore Torvund, executive vice president for Oil and Energy in Norsk Hydro, at a conference in Oslo on Tuesday.
How can we extract an extra NOK 2,000 billion from the Norwegian shelf during the next 50 years?
This was the main question posed at one of the autumn's most important oil conferences in Norway, The Oslo Petroleum Conference. The Conference took place on Tuesday and Wednesday at Folkets Hus in Oslo, which was packed with representatives from both the authorities and industry, among them Hydro's Tore Torvund.
"We've passed the peak"
Torvund pointed out in his speech that the oil production peak on the Norwegian continental shelf had in fact been passed.
"This is a milestone that requires us to adopt new measures. It is clear that the state has most to gain here, taking as it does up to 90 percent of shelf revenues. Greater value creation, by means of the goal set in white paper no. 38, will not be possible to achieve without significantly amending the main parameters and promoting a positive interplay between the parties involved," said Torvund to the approximately 200 participants on the conference's first day.
In its white paper no. 38, the Norwegian government directs its focus to the remaining recovery potential for petroleum and gas on the Norwegian shelf in the years ahead.
The paper outlines two possible scenarios for the petroleum industry: The long-term development scenario is based on continued growth on the Norwegian continental shelf for the next 50 years. The depletion scenario reveals how oil and gas prodution on the shelf can stagnate more rapidly than necessary.
The differences between these two scenarios may in fact represent NOK 2,000 billion in extra revenues. Such an amount will naturally have major consequences for all participants in the Norwegian oil industry, and not least for Norway itself.
"Look to the UK"
Torvund pointed out that the allocation of new exploration acreage, increased recovery rates, new technology, new working methods and new participants are important contributions to achieving the long-term goal set by the government. Nevertheless, he is convinced that a new tax regime is one of the most important factors in stumulating further growth on the shelf.
"A total reworking of the tax regime for the petroleum industry can help to bring about a higher rate of recovery, attract new entrants to the shelf and promote the internationalisation of the petroleum cluster on the Norwegian shelf. And these developments are vital if the government is to achieve its goal. Just look at the greater activity on the British shelf around 1985, as the result of adjusting the tax regime to the prevailing situation," he said.