Rigs report: Norway’s tax revisions will spur drilling in the North Sea

Brent crude oil edged up to US$43.18 per barrel, continuing its steady recovery from 21 April when it closed at US$19.33. Overall, Brent crude oil is trading at 37% below its highest close at US$68.91 on 6 January.

While data compiled by Westwood Global Energy Group showed that the number of floaters contracted in the North Sea during week 30 2020 fell from 23 to 20 week-on-week, the region was not without some positive developments.

Independent E&P Vår Energi reported it was resuming drilling activities in the Barents Sea and the North Sea, after postponing operations due to the Covid-19 pandemic and oil price collapse. Playing Vår Energi’s decision were the temporary changes made by the Norwegian Government in June to petroleum tax. The tax changes by the government are projected to improve the liquidity of E&P companies, freeing up as much as Nkr100Bn (US$10.8Bn) for investments in 2020 and 2021. The move by the Norwegian parliament safeguards jobs in the offshore oil and gas industry. The petroleum industry is Norway’s largest and most important industry in terms of share of value added, state revenues, export value and investments.

Vår Energi’s drilling campaign, carried out by Saipem-owned drilling rig Scarabeo 8, includes two production and one water injection well at the Goliat Field in the Barents Sea. Additionally, the King Prince exploration well, near the Balder/Ringhorne field in the North Sea, will be drilled.

“After a period of difficult choices and decisions, we are pleased to announce that we are resuming parts of the drilling schedule that was postponed earlier this year due to the extraordinary situation the entire industry was in,” said Vår Energi vice president procurement Annethe Gjerde.

“The Storting’s decision means that we can quickly turn around to carry out these drilling activities,” said Ms Gjerde. “We are happy and proud to see that this triggers much needed activity in the rig market as well as in the supplier industry,” she added.

Vår Energi, jointly owned by Italian energy company Eni (69.6 %) and Norway private equity investor HitecVision (30.4 %), plans to start drilling activity in the Barents Sea in Q3 2020.

In May, Norway decided to cut production to contribute to a faster stabilisation of the oil market.

Plans call for production to be reduced by 250,000 barrels per day in June and 134,000 barrels per day in second half of 2020. Additionally, production from several new field developments will be delayed until 2021. The total Norwegian oil production will be 300,000 barrels per day lower in December 2020 than what the companies have planned for.

The actual production figures for the Norwegian Continental Shelf in June shows an oil production of 1,543,000 barrels per day. This translates to a cut in the Norwegian oil production in June of 316,000 barrels per day.

Source: rivieramm.com

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