Norway is one of the world’s major oil producers, and now that its oil and gas industry has recently been bolstered by new framework conditions, many are wondering what the future will bring. Technological developments predict a rising demand for Norwegian gas.
At 52, Tore Sandvold probably has more experience and knowledge of the Norwegian oil industry and oil policy than anyone else including the many cabinet ministers to whom he has reported. Norways oil history essentially started in the early 1970s. Sandvolds career in the ministries started at around the same time.
He knows the industrys history, and can evaluate its future.
A competitive arena
When the first oil companies started to look at Norways continental shelf in the 1960s, we had, naturally enough, no Norwegian oil expertise. American and, after a while, French, oil companies were the most important at that time. Now there are around 20 foreign oil companies actively involved on the Norwegian shelf, he says.
In the meantime, Norwegian companies have developed a unique knowledge of the countrys continental shelf. Statoil and Norsk Hydro are the most important. This is as a result of their expertise combined with the Norwegian authorities framework conditions. They have taken it step by step over the years, and Statoil and Norsk Hydro have been very good at exploiting this.
But the Norwegian authorities want competition and diversity. Norways continental shelf is exposed to competition and we are dependent on attracting the best companies and the foremost expertise.
Not all can survive
Recent changes to the framework conditions that Sandvold is referring to include a reduction in royalties and carbon dioxide duties, alteration of licensing terms and the introduction of a technology programme.
But he also points to technological developments to reduce the costs of recovering oil and gas from the Norwegian continental shelf, when considering other, future changes.
The Norwegian shelf is a high-cost area where the focus must always be on reducing costs, he says. The simplest means of reducing costs is by developing new technological and organisational solutions. Large, complex, fixed installations will be replaced by smaller, subsea installations. Companies will find new ways of cooperation and organisation.
Today, the order books of the large offshore yards along the Norwegian coast are almost empty. Sandvold does not believe that new development projects will solve all these yards many problems in the short term.
I dont think all the major yards can continue as hitherto - at least not if they are to survive on orders from the Norwegian continental shelf alone. Future investment will be lower than weve been used to, and the type of equipment will be different.
Gas more valuable
On a more optimistic note, he adds, Norwegian gas will be more valuable in the future than we realise. Technological developments predict less use of oil but are positive for gas. Oil is primarily best for transport. Now hybrid cars, in which electricity can replace some of the cars energy requirements, are being launched.
The situation is different for gas. It already has wide-ranging areas of application. Gas has a number of advantages. Other energy sources, such as oil and coal, pollute far more than gas. Questions about the future use of nuclear power, together with prognoses showing a rising demand for energy, are also positive for gas.
The fact that sales of Norwegian gas were lower than expected last year does not worry Sandvold. That was mainly because some new customers have bought the minimum volume under their contracts, while possible options have not been exercised. I dont think this is a trend. Our gas resources will be extremely valuable in time. We have large reserves and new fields. Were close to the market and have already invested in an infrastructure that can be utilised well into the future.