The Norwegian Petroleum Directorate (NPD) has reported that 10 out of 50 exploration wells on the Norwegian Continental Shelf will be postponed this year and that some projects will not happen in the future if the low oil price is sustained as a...
The Norwegian Petroleum Directorate (NPD) has reported that 10 out of 50 exploration wells on the Norwegian Continental Shelf will be postponed this year and that some projects will not happen in the future if the low oil price is sustained as a result of the Covid-19 pandemic.
‘What we’re seeing now, is both exploration wells being postponed and delays/cancellations of geophysical mapping. As of today, it appears that around 10 exploration wells will be postponed, meaning that there will be about 40 exploration wells in 2020. However, we can’t rule out further changes in this area in the future,’ said NPD director general Ingrid Sølvberg.
The NPD is concerned about the postponement of ‘time-critical’ wells. ‘This means wells where potential discoveries are slated to be developed near to existing infrastructure in a late phase of their production cycle. Here we have to explore while the infrastructure still has a sufficient operating horizon.’
If the low oil price situation endures, this could reduce the economic life of the fields in the North Sea and Norwegian Sea because it will less viable to make discoveries near to certain infrastructure that will be shut down earlier than planned.
‘On fields in operation, we’re seeing wells being postponed due to the low oil price and/or because staffing offshore is reduced due to the corona situation. There is a risk of several of these wells not being drilled later, which could mean a risk of losing resources,’ Sølvberg said.
With staffing reduced across the industry, one significant challenge over the short term will be the labour market. ‘Oil companies should balance consideration for their own cash flow with the need to have a viable supplier industry. It takes time to build a viable supplier industry, but it is very quickly dismantled. This will happen if workers in the supplier industry have transferred to other industries by the time this is over,’ Sølvberg said.
‘A substantial drop in activity will also have an important impact as regards recruiting younger employees to the industry in the future. Last autumn, we saw an increase in the number of applications to petroleum-related subjects for the first time since the last oil price drop in 2014. This crisis could stop all that.’
