OSLO--Norway's Auditor General warned Wednesday that some of the
country's oil resources may be lost forever, saying the government
should add pressure on oil companies to develop time-critical
projects.
The Auditor General, which oversees the government's use of
public resources, warned that some oil might remain underground
because it is in aging fields with old equipment that would be too
expensive to replace. Some of Norway's projects to squeeze the last
drops out of offshore fields have been delayed after the oil-price
plunge in the second half of 2014 to around $60 per barrel, meaning
the equipment could continue to age past its useful life.
"The Petroleum Directorate is actively promoting the good use of
resources, but isn't always able to ensure good enough progress in
field development through dialog with the licensees," Auditor
General Per-Kristian Foss said, recommending tighter monitoring of
oil companies.
Current plans of oil companies imply more than 50% of Norway's
oil and gas resources will be left in the ground, the auditor
general said. Based on an oil price of $57.9 per barrel, an
increase in the recovery rate in existing fields by one percentage
point would create roughly 260 billion Norwegian kroner ($32.87
billion), he said.
State-controlled Statoil, the dominant operator off Norway,
recently delayed both the Johan Castberg project in the Barents Sea
and a project to boost output on the aging Snorre field in a bid to
cut costs. The Snorre project could add up to 300 million barrels
to the field's current resources, and is widely seen as
time-critical.
Norway's auditor general questioned whether the country's
authorities were properly set up to take care of state interests,
amid growing oil-sector complexity. The number of drilling licenses
off Norway has increased 67% since 2006, and the number of oil
companies has grown to 38 from 29, it said.
State-owned Petoro AS, which manages the government's direct
ownership in over 40 fields off Norway, has more than doubled the
number of licenses since 2003. However, staff numbers have grown
only by about 20% since 2007, and the company has limited capacity
to challenge the operators' views, the auditor general said.
The country's Ministry of Petroleum and Energy responded that
there may be good reasons for companies to delay projects,
including risk and the need to boost project economics. The
ministry warned that adding pressure on the oil companies could
reduce their trust in the authorities and turn them away from
marginal projects off Norway.
Write to Kjetil Malkenes Hovland at
kjetilmalkenes.hovland@wsj.com
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