Norway has this year politely declined invitations from OPEC to join talks on curbing oil production. Its strategy is now paying off.
Western Europe’s biggest crude producer, which isn’t a member of the Organization of Petroleum Exporting Countries and will not feature alongside Russia among non-members contributing to output cuts under last week’s deal, will nonetheless reap the benefits of higher prices on revenue and activity.
Investments in Norway’s offshore industry, set to drop for a third straight year in 2017, will get a helping hand from the OPEC deal already next year, Tord Lien, the country’s Petroleum and Energy Minister said. It’s too early to say by how much, he said.
“What OPEC has done is good,” Lien said in an interview at a conference organized by state oil company Statoil ASA in Oslo Tuesday. “It’s good in the short term for producers, good for investments in the oil industry and the global energy supply, so it’s also good for consumers in the time ahead.”
Investments in Norway’s oil industry are expected to drop to 147 billion kroner ($18 billion) next year, down 34 percent from the 2014 peak, making it the worst downturn ever for the country’s offshore industry. The spending reduction that has followed the collapse of oil prices two years ago have led to more than 40,000 jobs cuts in the country, according to DNB ASA.
Norway has declined to participate in OPEC talks and rebuffed any idea of output curbs because crude production has fallen by about half since a 2000 peak. Still, Norway’s output is on track to increase for a third consecutive year thanks in part to efficiency gains, according to figures from the Norwegian Petroleum Directorate.
OPEC’s deal will accelerate a re-balancing of the global oil market, both Lien and Statoil’s Chief Executive Officer Eldar Saetre said at the company’s annual Autumn Conference in Oslo. Brent crude has advanced almost 16 percent since the day before the agreement was struck Nov. 30, and traded at $53.72 a barrel on Wednesday.
But it’s not certain the deal will have as immediate an effect on investments in Norway as Lien expects. The most capital-intensive projects that will account for most of the spending next year have already been approved, Erik Bruce, chief analyst at Nordea AB in Norway, said by phone.
“There could be marginally more exploration activity, maybe a bit more maintenance,” he said. “I doubt that we will see any significant effect next year. I’m not planning to change my estimates.”