Overview

The ocean basins off the coast of Norway – the North Sea, the Norwegian Sea, and the Barents Sea – have proven to be a critical natural resource for centuries.  Ocean travel and fisheries created good conditions for settlements and still do.  From 1969, when Phillips Petroleum discovered the giant Ekofisk Field, the oceans became a source of considerable energy wealth. After more than 50 years of oil and gas production, the diversification of the offshore energy sector continues, and now the basins are being developed to become power hubs, integrating large-scale offshore wind projects, developing grids and pipelines to neighboring countries, electrifying oil and gas platforms, developing infrastructure for carbon, capture, transportation, and storage, and making plans for hydrogen and ammonia supply chains.  This is a collaborative effort, relying on the right international/EU policies and technology input from foreign companies.  The U.S. ecosystem is already strong in Norway, and the business climate is considered stable and good.

Offshore wind:  Offshore wind is a rapidly growing focus in Norway, and Norwegian and international companies are collaborating on offshore wind developments in the North Sea and beyond (including in the United States), but there are also new developments planned on the Norwegian Continental Shelf.  As a first step, eleven 8MW floating turbines are being installed to cover at least 35% of the required energy on five large offshore oil and gas installations.  The project, Hywind Tampen, will reduce CO2 emissions by 200,000 metric tons annually when connected in Q3 2022.  The Norwegian Parliament also decided to electrify all offshore oil and gas fields at Utsirahøyden in the North Sea with electricity from the mainland.  Large-scale developments are considered the next step.  

Because of previously low electricity prices and what was perceived as an abundant supply of clean hydropower, Norway has not had the same incentives to develop offshore wind power compared to North Sea neighbors UK, Denmark, Germany, and the Netherlands.  As of 2022 this is now changing due to significant increases in energy prices domestically and abroad, making offshore wind power a more viable and important component of Norway’s energy future.  In 2020, Norway opened two large areas for development, Sørlige Nordsjø II, close to the shallow Dogger Bank in the south, and the much deeper development area, Utsira Nord.  In June 2021, the Norwegian Ministry of Petroleum and Energy announced several proposals for public consultation, aiming at 2-3 GW initially.  While the financial structure is still being discussed, tentative plans suggest an auction model, with direct subsidies for floating structures in the north and likely no financial support for fixed structures in the south.  The industry has shown considerable interest, with 12 consortia identified in Q2, 2021.  Several consortia are expected to be awarded contracts, and U.S. companies are encouraged to reach out to the consortia to offer products, services, and technologies.

How the offshore wind farms will integrate with neighboring countries, existing electrical cables, and subsea infrastructure such as oil/gas platforms, or even to produce hydrogen or ammonia locally is still to be decided.  However, there is no doubt the basins will soon develop into a diverse energy ecosystem, balancing the European grid and offering commercial opportunities.  

An indication of the commitment to these developments from Norwegian companies is the fact that Equinor, Norway’s largest company and a significant international energy company, has committed to invest USD 23 billion in renewables (mostly offshore wind) over the next five years.

In 2022 the Norwegian government has proposed a major initiative to promote offshore wind power.  The target is to open areas for offshore wind power production that will generate 30 000 MW of power in Norway by 2040.  This is nearly equivalent to the amount of electricity produced in Norway.  Over the next 20 years, the plan is to go from having two offshore wind turbines in operation to having around 1,500 turbines.

Offshore oil and gas:  The petroleum sector continues to be a key driver for the Norwegian economy.  It is the country’s single largest industry.  In 2021 and 2022, driven by higher energy prices, supply disruptions, and sanctions, the petroleum sector is having a growing significance on Norwegian GDP and government cashflow compared to previous years.  The sector accounts for 28% of GDP, 17% of total investments, 42% of state revenues, and 58% of total exports (not including the service and supply industry).  Norway is the 7th largest natural gas producer in the world, supplying 3 percent of global gas consumption.  Norway ranks as the world´s 3rd largest exporter of natural gas.  Norway is also a significant oil producer, accounting for 2.3 percent of global oil production in 2020.  Norway ranks as the 10th largest exporter of oil.  Indirectly, the petroleum sector contributes around 200,000 jobs throughout Norway.  Norway’s oil and liquids production peaked in 2001 at 3.4 million barrels per day (bpd) and has declined to the current level of around 2 million bpd.  Oil and gas production in Norway is only offshore.  While there are significant onshore processing facilities, there is no onshore production. 

Despite the cyclical nature of this sector, the overall mood in Norway’s petroleum industry remains cautiously optimistic.  The Norwegian oil and gas industry sector is global in nature.   Although the Norwegian continental shelf (NCS) is maturing as an offshore oil and gas play, Norway has had several significant discoveries in the past few years, including the giant Johan Sverdrup field.  The Norwegian Petroleum Directorate projects a total of $14 billion to be invested in exploration, production and pipeline transport on the NCS in 2022 and annually over the next couple of years. 

There are two kinds of licensing rounds on the NCS, the numbered licensing rounds and the Awards in predefined Areas (APA).  The numbered licensing rounds are normally held every other year and include frontier parts of the NCS.  APA rounds are announced every year and comprise the mature parts of the NCS, with better-known geology and more developed infrastructure.  Companies that want to become an operator or licensee on the NCS must be pre-qualified.

Resource accounts with estimates of both produced and remaining resources show that there are 8.1 billion standard cubic meters (scm) of oil equivalents (oe) left to be produced on the NCS.  During its 50 years of production, Norway has depleted about 7.6 billion scm oe – or 48% of its total resources.  The average estimated recovery factor for oil on the NCS is now close to 50% after steady increments during the last decade.  Many of the fields that are producing today are of such a magnitude that even a small increase in the recovery factor will yield substantial extra oil volumes. 

Most of Norway’s gas exports are destined for Europe.  Norwegian gas accounts for about 25% of the EU’s gas demand.  Norway supplies almost 40% of the UK’s gas consumption, and Norway also provides substantial amounts of gas to Germany and France. 

Leading Sub-Sectors 

Leading sub-sectors for U.S. suppliers continue to be increasingly advanced drilling and well completion technologies.  Key areas continue to be zero-surface, subsea and deep water technology; advanced technology facilitating remote/onshore, real-time operations, and solutions advancing the e-field, reducing the need for transportation and the number of personnel having to stay on offshore platforms; unmanned systems and ROVs; innovative solutions for improved recovery and marginal field technology; carbon capture and storage (CCS), and any other technology reducing CO2 and other harmful emissions (Norway introduced a carbon tax in 1991, levied on all combustion of gas, oil and diesel in operations on the NCS and on releases of CO2 and natural gas); LNG technology/gas value chain, incl. technology facilitating more efficient and clean production and transportation of gas from remote locations; as oil and gas fields are depleted and production ceases, investments are also needed on abandonment or alternative use of installations. 

There is growing overlap with other industry and technology sectors, e.g. how to operate in extreme conditions using increasingly advanced technology, sensors and intelligent tools.  An example of this is learning and sharing best practices with leaders in robotics, space technology, medical technology, etc. 

Most purchases for the offshore industry stem from Norwegian and international oil companies operating on the NCS and from local yards and offshore structure contractors building and maintaining offshore installations.  There is extensive use of engineering, procurement, and construction (EPC) contracts.  Most of these major contracts are channeled through Norwegian and international offshore engineering and service companies developing the NCS. 

Publicly listed Equinor ASA, with a 67% Norwegian Government ownership share, controls approximately 80% of the operatorships on the NCS. 

Leading U.S. oil producers and service companies are present in Norway: ConocoPhillips, ExxonMobil (although the company divested its offshore operatorships and licenses in 2019), Halliburton, TechnipFMC, National Oilwell Varco, Schlumberger, Baker Hughes, GE, Weatherford, Oceaneering, etc. 

Opportunities 

Investment and operating costs have remained high on the NCS in recent years.  The Norwegian government emphasizes that the oil industry needs to strive to make its exploration activities as efficient and cost-effective as possible while at the same time showing due consideration for the environment and the fisheries.  The remaining resources on the NCS are gradually becoming more difficult to produce, both technologically and commercially.  The industry’s development and implementation of new and cost-saving technologies will be of crucial importance in this regard.  Norway continuously seeks new and proven technology to reduce costs, lower emissions, and enhance recovery.

 Norway is a mature market for the oil and gas sector as it has been producing oil and gas from the North Sea for five decades.  The challenge that new U.S. companies face is competition from established, well-qualified domestic and regional equipment and service suppliers. 

Resources 

• Norwegian Ministry of Petroleum and Energy 
• Norwegian Petroleum – Government of Norway website on Norwegian petroleum activities
• Norwegian Petroleum Directorate
• Norwegian Ministry of Trade, Industry and Fisheries
• Petroleum Safety Authority Norway
• Norwegian Coastal Administration
• Norwegian Environment Agency
• Norwegian Oil and Gas Industry Association  
• Norwegian Shipowners’ Association
• Norwegian Energy Partners  
• Norwegian Wind Energy Association