FRACTIONAL FLOW

Fractional flow, the flow that shapes our future.

Posts Tagged ‘NPD

Status of Norwegian Natural Gas at end of 2015 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.

Norway is the third largest gas exporter in the world. In 2015, Norway exported about 114 Gcm (Bcm) gas, mainly to other countries in Europe.

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

  • NPD in their most recent forecast further revised down and narrowed their band for future delivery potential with about 10 Gcm/a (Bcm/a) by 2025 and pushed forward the start of decline one year relative to their previous forecast.
  • I now expect the Norwegian delivery potential for natural gas relative to 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 defined policies for the role natural gas will have in its future energy mix.

This post is an update to my post in 2015 looking at the status as of end 2014.

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 2015 and with my forecast for delivery potential towards 2025. The chart also shows the band of 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 2015 and with my forecast for delivery potential towards 2025.
The chart also shows the band of 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 2015 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 2015, refer also figure 2.

At end 2015 the NPD projection of Norwegian natural gas supply potential towards 2025 was revised down.

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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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Status of Norwegian Natural Gas and a Forecast towards 2025

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

Included is also a brief look at actual and forecast development for EU’s (+Norway) consumption and production of natural gas.

Norway is not a formal member of the European Union (EU).

This post is an update on my post back in March 2013 (in Norwegian).

Norway, after Russia, has been and is the EU’s second biggest supplier of natural gas. In Europe the outlook for natural gas supplies is followed with heightened interests following the recent developments in Ukraine and its ability to continue to afford Russian natural gas. A big portion of the  natural gas consumed by EU transits from Russia through Ukraine.

The potential for any interruptions to EU’s natural gas supplies has made EU consult other suppliers requesting these to have a look at their potentials to increase deliveries to offset any shortfalls to natural gas deliveries from Russia.

Fig 1 Norway actual as of 2013 and forecast natural gas production to 2025

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 2013 and with my forecast for delivery potential towards 2025. The chart also shows the Norwegian Ministry of Petroleum and Energy (MPE) forecasts; green line upper projection, orange line lower projection. 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 production installations. Numbers in Giga cubic meters (Gcm = Bcm)

My forecast (developed in the spring of 2014) and the forecast from the Norwegian Ministry of Petroleum and Energy (MPE) shows basically the same trends, but differs about the timing for the start of  the decline and how steep it will become. My forecast results in some kind of plateau towards the end of this decade followed by a steep decline, refer also figure 4.

I now expect the Norwegian delivery potential for natural gas to decline by 40 – 50% by 2025.

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Norwegian Crude Oil Extraction, Fall 2014 Status

This post is a status update on crude oil extracted from the Norwegian Continental Shelf (NCS) and presents the developments of some selected discoveries long in the tooth and some more recent developments.

I presented my 2014 crude oil forecast towards 2040 in Norwegian Crude Oil Reserves and Production per 2013 in April 2014.

Norwegian crude oil extraction, now shows a small uptick. Looking further into the Norwegian Petroleum Directorate’s (NPD) data it turns out this temporary growth in extraction originates from discoveries that started to flow prior to 2002, refer also figures 2, 4, 5, 6, 7 and 8.

Some of the discoveries brought to flow since 2002 have performed below expectations since these were sanctioned, some of which were described in A closer Look at some recent Developments Offshore Norway.

Figure 01: The columns show NCS crude oil extraction by month for 2012 (grey), 2013 (red)  and for 2014 (blue) as of August (preliminary NPD figures).

Figure 01: The columns show NCS crude oil extraction by month for 2012 (grey), 2013 (red) and for 2014 (blue) as of August (preliminary NPD figures).

As of August 2014 NCS crude oil extraction is around 20 kb/d (1%) above all of 2013.

(kb; kilo barrels, 1,000 barrels)

A closer look into the NPD estimates of reserves (EUR) and monthly actual extraction numbers shows that some of the recent developments have or had a high depletion rate, which raises expectations for a near future steep decline in their crude oil extraction rate.

There has been a small and expected temporary growth in crude oil extraction so far in 2014 relative to all of 2013. Two sources were found to contribute to this:

  • Higher depletion (extraction) rates from some of the recent developments than what could be expected from NPD’s estimates on ultimate recovery (EUR) as of end 2013.
  • Some of the developments long in the tooth has temporary reversed their decline and demonstrated some growth, which is believed to be due to the deployment of various drainage/technological strategies made possible by the high oil price.

Some typical characteristics for discoveries in the extraction phase;

  • As the reservoirs becomes 50 – 60% depleted, the extraction rate (flow) starts to decline.
  • A high depletion rate (higher extraction [production]) depletes the reservoir faster, which normally results in steeper declines.

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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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