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Fears of a less profitable oil industry

The Norwegian Petroleum Directorate (NPD) is concerned that higher costs and a shortage of drilling platforms will delay development and exploration of new resources on the Norwegian Shelf.

Oil companies are expected to present between 15 and 20 plans for development of oil and gas finds over the next two years. The growth in investments is expected to be 40 percent higher in 2012 than in 2010.


Up until now, Bente Nyland, Oil Director, has been very happy with the companies’ results. There have been several new finds, but now the lack of oil platforms may delay growth and profits.
New developments depend heavily on suppliers, and whether they have the capacity to take everything on, Nyland explains to NRK. The challenge is to avoid starting a drastic upwards price spiral, she says.


Only this year, the NPD estimates that NOK 160 billion will be invested in new developments to cover the shortage of oil platforms. With investments of this magnitude, however, a big price increase from suppliers and unstable oil prices could easily make the industry less profitable.


"I am guessing that prices will increase, which will make the unit price of production pretty high," says Nyland. "In that case, the margins will be very small if the price of oil drops."


State Secretary Per Rune Henriksen tells NRK that in order to succeed, it may be necessary to move platforms between foreign shelves and Norway. "What is important is that we are able to retrieve the resources we know exist on the Norwegian shelf," he says.


The Ministry of Petroleum and Energy’s priority moving forward will be to try to prevent a bottleneck situation in regards to development and exploration. According to Henriksen, the ministry has established a committee that will look closely at the situation, and aim to improve the flow of platforms between the Norwegian and foreign shelves.

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