FRACTIONAL FLOW

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Norwegian Crude Oil Reserves And Extraction per 2016

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In this post I present actual Norwegian crude oil extraction and status on the development in discoveries and reserves and what this has now resulted in for expectations for future Norwegian crude oil extraction.

This post is also an update of an earlier post about Norwegian crude oil reserves and production per 2015.

Norwegian crude oil extraction peaked in 2001 at 3.12 Million barrels per day (Mb/d) and in 2016 it was 1.62 Mb/d, growing from 1.57 Mb/d in 2015 and 1,46 Mb/d in 2013 (a growth of 10% since 2013).

The Norwegian Petroleum Directorate’s (NPD) recent forecast expects crude oil extracted from the Norwegian Continental Shelf (NCS) to become 1.60 Mb/d in 2017.

Figure 01: The chart shows the historical extraction (production) of crude oil (by discovery/field) for the Norwegian Continental Shelf (NCS) with data from the Norwegian Petroleum Directorate (NPD) for the years 1970 – 2016. The chart also includes my forecast for crude oil extraction from discoveries/fields towards 2030 based on reviews on individual fields, NPD’s estimates of remaining recoverable reserves, the development/forecast for the R/P ratio as of end 2016.
Further, the chart shows a forecast for total crude oil extraction from sanctioned discoveries/fields (green area, refer also figure 02) and expected contribution from Johan Sverdrup phase I (blue area) [at end 2016 estimated at 1.78 Gb; [Gb, Giga (Billion) barrels, refer also figure 07] and this development phase is now scheduled to start flowing in late 2019.

Sanctioned Developments in Figure 01 represents the total contributions from 7 sanctioned developments of discoveries now scheduled to start to flow between 2017 and 2019.

My forecast for 2017 is 1.51 Mb/d with crude oil from the NCS.

My forecast shown in figure 01 includes all producing and sanctioned developments, but not contingent resources in the fields (business areas). The forecast is subject to revisions as the reserve base becomes revised (as discoveries pass the commercial hurdles) the tail is likely to fatten as from 2022/2023 mainly due to Johan Sverdrup phase II and Johan Castberg (Barents Sea).

My forecast includes about 7% reserve growth (300 Mb) for discoveries in the extraction phase, but does not include the effects from fields/discoveries being plugged and abandoned as these reach the end of their economic life.

Discoveries sanctioned for development and Johan Sverdrup (with an expected start up late 2019) is expected to generally slow down the decline in Norwegian crude oil extraction.

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Norwegian Crude Oil Reserves And Extraction per 2015

In this post I present actual Norwegian crude oil extraction and status on the development in discoveries and reserves and what this has now resulted in for expectations for future Norwegian crude oil extraction.

This post is also an update of an earlier post about Norwegian crude oil reserves and production per 2014.

Norwegian crude oil extraction peaked in 2001 at 3.12 Million barrels per day (Mb/d) and in 2015 it was 1.57 Mb/d, growing from 1.51 Mb/d in 2014.

The Norwegian Petroleum Directorate’s (NPD) recent forecast expects crude oil extraction from the Norwegian Continental Shelf (NCS) will decline to 1.53 Mb/d in 2016.

Figure 01: The chart shows the historical extraction (production) of crude oil (by discovery/field) for the Norwegian Continental Shelf (NCS) with data from the Norwegian Petroleum Directorate (NPD) for the years 1970 - 2015. The chart also includes my forecast for crude oil extraction from discoveries/fields towards 2030 based on reviews on individual fields, NPD’s estimates of remaining recoverable reserves, the development/forecast for the R/P ratio as of end 2015. Further, the chart shows a forecast for total crude oil extraction from sanctioned discoveries/fields (green area, refer also figure 02) and expected contribution from Johan Sverdrup (blue area) [at end 2015 estimated at 1.76 Gb; [Gb, Giga (Billion) barrels, refer also figure 06] and this development phase is now scheduled to start flowing in late 2019.

Figure 01: The chart shows the historical extraction (production) of crude oil (by discovery/field) for the Norwegian Continental Shelf (NCS) with data from the Norwegian Petroleum Directorate (NPD) for the years 1970 – 2015. The chart also includes my forecast for crude oil extraction from discoveries/fields towards 2030 based on reviews on individual fields, NPD’s estimates of remaining recoverable reserves, the development/forecast for the R/P ratio as of end 2015.
Further, the chart shows a forecast for total crude oil extraction from sanctioned discoveries/fields (green area, refer also figure 02) and expected contribution from Johan Sverdrup (blue area) [at end 2015 estimated at 1.76 Gb; [Gb, Giga (Billion) barrels, refer also figure 06] and this development phase is now scheduled to start flowing in late 2019.

Sanctioned Developments in Figure 01 represents the total contributions from 7 sanctioned developments of discoveries now scheduled to start to flow between 2016 and 2019.

My forecast for 2016 is 1.50 Mb/d with crude oil from the NCS.

My forecast shown in figure 01 includes all sanctioned developments and not discoveries (refer also figure 08) and contingent resources in the fields. The forecast is subject to revisions as the reserve base becomes revised (as discoveries pass the commercial hurdles) which likely will fatten the tail of the presented forecast post 2020.

My forecast assumes some reserve growth, but does not include the effects from fields/discoveries being plugged and abandoned as these reach the end of their economic life.

Discoveries sanctioned for development and Johan Sverdrup (with an expected start up late 2019) is expected to slow down the decline in Norwegian crude oil extraction.

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Status of Norwegian Natural Gas at end of 2014 and Forecasts towards 2025

In this post I present actual Norwegian natural gas production, status on reserves, the development in discoveries and what this results for Norwegian Petroleum Directorate (NPD) and my expectations for the future delivery potential for Norwegian natural gas.

Norway, after Russia, has been and is the EU’s second biggest supplier of natural gas.

Included is also a brief look at developments in actual consumption and production of natural gas in the EU 28 (the 28 members of the European Union).

  • NPD revised down their band for future delivery potential by about 10 Gcm/a (Bcm/a) and moved the start of decline one year forward relative to their forecast last year.
  • I now expect the Norwegian delivery potential for natural gas relative to 2014/2015 to decline by more than 40% by 2025.
  • Europe will increasingly have to rely on natural gas imports from more distant sources and should by now have implemented policies for the role natural gas will have in its future energy mix.

This post is an update to my post in 2014 looking at the status as of end 2013.

Figure 1: The chart above shows development in natural gas exports from production installations on the Norwegian Continental Shelf (NCS) as reported by the Norwegian Petroleum Directorate (NPD) from 1996 to 2014 and with my forecast for delivery potential towards 2025. The chart also shows the NPD forecasts; green line upper projection, orange line lower projection. NPD’s central projection is in about the middle of the green and orange lines. The black dotted line is the forecast from the International Energy Agency’s World Energy Outlook 2012 (IEA WEO 2012). Numbers are believed to be gross exports from the production installations and thus not adjusted for “shrinkage” from Natural Gas Liquids (NGL) extraction, primarily at Kollsnes and Kårstø. The NGL extraction reduces total sales gas volumes with around 4% relative to what is exported from the producing installations. Numbers in Gcm, Giga cubic meters (Gcm = Bcm; Billion cubic meters)

Figure 1: The chart above shows development in natural gas exports from production installations on the Norwegian Continental Shelf (NCS) as reported by the Norwegian Petroleum Directorate (NPD) from 1996 to 2014 and with my forecast for delivery potential towards 2025.
The chart also shows the NPD forecasts; green line upper projection, orange line lower projection. NPD’s central projection is in about the middle of the green and orange lines.
The black dotted line is the forecast from the International Energy Agency’s World Energy Outlook 2012 (IEA WEO 2012).
Numbers are believed to be gross exports from the production installations and thus not adjusted for “shrinkage” from Natural Gas Liquids (NGL) extraction, primarily at Kollsnes and Kårstø. The NGL extraction reduces total sales gas volumes with around 4% relative to what is exported from the producing installations.
Numbers in Gcm, Giga cubic meters (Gcm = Bcm; Billion cubic meters)

My forecast  and NPD’s forecast at end 2014 are basically identical towards the end of this decade, but differs about the timing for the start of the decline and how steep this will become as from early next decade. My forecast is also tested versus the Reserves over Production (R/P) ratio as of end 2014, refer also figure 2.

At end 2014 the NPD projection of Norwegian natural gas supply potential towards 2025 was revised down.

NPD’s central projection is in about the middle of the green and orange lines. Note the span of uncertainties in the NPD’s forecast.

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Norwegian Crude Oil Reserves And Extraction per 2014

In this post I present actual Norwegian crude oil extraction and status on the development in discoveries and reserves and what this has now resulted in for expectations for future Norwegian crude oil extraction.

This post is also an update of an earlier post about Norwegian crude oil reserves and production per 2013.

Norwegian crude oil extraction peaked in 2001 at 3.12 Million barrels per day (Mb/d) and in 2014 it was 1.52 Mb/d.

The Norwegian Petroleum Directorate’s (NPD) recent forecast expects crude oil extraction from  the Norwegian Continental Shelf (NCS) will become around 1.49 Mb/d in 2015.

Figure 01: The chart shows the historical extraction (production) of crude oil (by discovery/field) for the Norwegian Continental Shelf (NCS) with data from the Norwegian Petroleum Directorate (NPD) for the years 1970 - 2014. The chart also includes a forecast for crude oil extraction from discoveries/fields towards 2040 based on reviews on individual fields, NPD’s estimates of remaining recoverable reserves, the development/forecast for the R/P ratio etc. as of end 2014. Further, the chart shows a forecast for total crude oil extraction from sanctioned discoveries/fields (green area, refer also figure 02) and expected contribution from Johan Sverdrup (blue area) [at end 2014 estimated at 2.22 Gb; [Gb, Giga  (Billion) barrels, refer also figure 05]  which is now scheduled to start flowing in late 2019.

Figure 01: The chart shows the historical extraction (production) of crude oil (by discovery/field) for the Norwegian Continental Shelf (NCS) with data from the Norwegian Petroleum Directorate (NPD) for the years 1970 – 2014. The chart also includes a forecast for crude oil extraction from discoveries/fields towards 2040 based on reviews on individual fields, NPD’s estimates of remaining recoverable reserves, the development/forecast for the R/P ratio etc. as of end 2014.
Further, the chart shows a forecast for total crude oil extraction from sanctioned discoveries/fields (green area, refer also figure 02) and expected contribution from Johan Sverdrup (blue area) [at end 2014 estimated at 2.22 Gb; [Gb, Giga (Billion) barrels, refer also figure 05] which is now scheduled to start flowing in late 2019.

“Sanctioned Developments” in Figure 01 represents the total contributions from 8 sanctioned developments of discoveries now scheduled to start to flow between 2015 and 2017.

My forecast for 2015 is 1.47 Mb/d with crude oil from the NCS.

My forecast shown in figure 01 includes all sanctioned developments and not discoveries (refer also figure 07) and contingent resources in the fields. The forecast is subject to revisions as the reserve base becomes revised (as discoveries pass the commercial hurdles) which likely will fatten the tail post 2020 of the presented forecast.

My forecast assumes some reserve growth, but does not include the effects from fields/discoveries being plugged and abandoned as these reach the end of their economic life.

Discoveries sanctioned for development and Johan Sverdrup (with an expected start up late 2019) is expected to slow down the decline in Norwegian crude oil extraction.

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A CLOSER LOOK AT SOME RECENT DEVELOPMENTS OFFSHORE NORWAY

In this post I present a closer look at 4 developed discoveries (of a total of 10) that started to flow as from 2012 and their production as of September 2013 as these have been reported by the Norwegian Petroleum Directorate (NPD).

A common feature for several of the recent developments offshore Norway is that they have estimated recoverable reserves ranging from 10 – 100 Million Barrels of Oil Equivalents (MBOE) and are expensive to develop and generally developed with sub sea completed wells flowing back to an existing (host) installation for processing. The host installation normally provides for essential services for the operations of these sub sea installations. These discoveries typically annual flow are 15 – 25% of estimated recoverable reserves at some kind of plateau and enter into steep declines as they become 50 – 60% depleted. Normally these developments reach expected plateau a few months after they start to flow.

Several of the recent smaller developments* on the Norwegian Continental Shelf (NCS) have so far under-performed with regard to expected production. So far these have resulted that some companies have taken some write downs, and others will have to accept considerably lower returns on their investments.

The presented 4 developments were now expected to flow a total of 90 – 100,000 BOE/d. Actual data from NPD show that these 4 developments had an average total flow of 13,000 BOE/d for August and September 2013.

*) By smaller developments are here meant discoveries with estimated recoverable reserves  below 100 Million Barrels Oil Equivalents (MBOE).

This is worrisome for several reasons:

  • Write downs and lowered returns impact the companies’ financial abilities to develop future capacities and to carry through planned exploration activities.
  • Write downs destroy shareholder value.
  • If there is a general trend with weakened profitability and/or losses from smaller developed discoveries (which for some time has been dominant on NCS), this may lead to future revisions of the criteria the companies use for commercialization of these. In other words more experiences confirming the uncertainties surrounding smaller discoveries could push the commercial break even price lower, thus deferring developments of such discoveries that already are within the companies’ portfolios.
    This may fly under the radar coverage with the euphemism “targeting financial performance”.
  • To finance these developments, the companies took advantage of their debt carrying capacities and took on more debt. The companies thus bet their future on households and sovereigns (already overstretching their debt carrying capacities) being able to continue to take on more debt to pay for more expensive oil and natural gas so that the companies can retire their debts as these mature.
  • Apart from price, production flows have a considerable impact on companies cash flows and profitability. In the short to mid term it is more about the flows and less about the stocks.
  • The developments of these smaller discoveries have so far reduced the decline in total production from the legacy installations on the NCS as can be seen in figure 1. For some time these smaller developments also hid the “The Red Queen” effect from NCS discoveries brought to flow since 2002, refer also figure 2.
  • A more reserved attitude of the companies towards future developments of the discoveries made (and to be made) due to financial considerations, sets up the potential for a near term further acceleration of the decline in total NCS crude oil production.

This also illustrates that future developments now appear to be at the crossroads with what price the oil companies need for development of discoveries with what the consumers will continue to afford.

Figure 1: Development in crude oil production from the Norwegian Continental Shelf (NCS), split on fields flowing prior to January 1st 2002 (green) and discoveries developed to flow as from 2002.

Figure 1: Development in crude oil production from the Norwegian Continental Shelf (NCS), split on fields flowing prior to January 1st 2002 (green) and discoveries developed to flow as from 2002.

The new developments have now reduced the annualized total decline in crude oil production from NCS to just above 7%, refer also to figure 2. Discoveries/fields flowing prior to 2002 has seen a decline in their total crude oil production of more than 70% since 2002.

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