Page 9 - EurOil Week 06 2023

EurOil COMMENTARY EurOil

additional supply of gas will reach 24.9 bn cubic Shelf investments to reach $9.6bn in 2023
metres in 2028 – equivalent to about 6.225% of Rystad estimates that investments on the NCS
EU and UK demand. This increase in Norwegian are on track to reach $9.6bn in 2023, mainly
supply from 96 bcm at present to 121 bcm will due to contributions from Aker BP’s Yggdrasil
mean the country’s share of European gas sup- and Valhall PWP-Fenris projects. They are due
ply will rise from under a quarter to close to one to cost $12.3bn and $5.3bn respectively.
third within five years. Greenfield spending on the 35 new projects
“The outlook of this tax break is threefold: is projected to rise steadily over the next three
increased investment on the Norwegian Con- years, according to Rystad, from $9.1bn in 2024
tinental Shelf; increased tax receipts when pro- to $7.4bn in 2025 and $6.3bn in 2026, but a sharp
duction starts; and increased supply to Europe at decline is forecast after 2026, once the bulk of the
a critical time,” Rystad upstream analyst Mathias projects are up and running. However, invest-
Schoildborg said. “Norway will need to consider ment in Aker BP’s Yggdrasil project will con-
if this regime is a one-off to attract investment, or tinue out to 2027.
if lessons can be learned for the future.” All greenfield investments greenlit under the
temporary regime are due to be completed by
Temporary tax regime 2029.
Norway’s temporary tax regime provides oper- All told, the 35 projects contain 2.472bn
ators with an incentive to invest in new projects barrels of oil equivalent in economically and
by offering direct expensing and raising the in- technically recoverable resources. Aker BP’s
vestment uplift rate on all ongoing investments Yggdrasil hub only holds around 571mn boe,
in 2020 and 2021, as well as on all development split between 266mn boe from Munin, 238mn
projects greenlit before 2030 up until first oil is boe from Hugin and 66mn boe from Gulla. The
achieved. resource volume comprises 55% oil, 33% gas and
Even though the uplift rate was lowered from 12% natural gas liquids (NGL).
24% in 2020 to 12.4% in 2022, Rystad calculates The project with the second-biggest resource
that the temporary regime still lifts the net pres- volume is Shell’s subsea compression system
ent value and cuts the breakeven prices of devel- development at the Ormen Lange gas field,
opment projects versus the old and new cash which will recover an additional 210mn boe of
flow-based standard regimes. gas from the deposit.
“With oil prices having recovered substan- Equinor’s Breidablikk, Aker BP’s Fenris and
tially from the slump in 2020, NCS operators ConocoPhillips’ Tommeliten Alpha follow, hold-
have been scrambling to get their plans of devel- ing approximately 192mn boe, 140mn boe and
opment and operation (PDO) submitted within 134mn boe respectively. Measured by company,
the window so that their projects can benefit Aker BP, Equinor and Vaar take the upper hand
from the favourable financial terms prior to the by holding 780mn boe, 570mn boe and 265mn
implementation of the new standard regime at boe respectively from these projects.
the beginning of 2023,” Rystad said. Production from projects approved under
Among the 35 projects sanctioned under the temporary regime is due to peak at 921,000
the temporary regime, 24 were cleared last year, boepd in 2028. Output will not increase signif-
marking an all-time annual record. The com- icantly before 2025, despite Aker BP’s Graasel
bined value of those projects was almost $29bn, field coming on stream in 2021, Hod last year
representing another record. and a handful of smaller projects due for launch
Aker BP is the operator of 17 of the new in 2023 and 2024.
projects, including the Yggdrasil Hub (Munin, The first wave of extra flow will come from
Hugin and Fulla), the Valhall PWP-Fenris pro- projects such as Equinor’s Breidablikk, Vaar’s
ject, the Skarv Satellites project (Alve North, Balder Future, and ConocoPhillips’ Tommeliten
Idun North and Orn) and the Utsira High tie- Alpha reaching plateau after coming online in
back developments to Ivar Aasen and Edvard 2024, in addition to Shell’s Phase 3 of Ormen
Grieg (Symra, Troldhaugen and Solveig Phase Lange and Aker BP’s Tyrving starting up in 2025.
2). They are also located in the North Sea besides A steep climb in output towards the peak is
the Skarv satellites and Grassel. forecast, with production soaring from 300,000
In second place is Equino, operating 11 pro- boepd in 2025 to 446,000 boepd in 2026 and
jects, including Breidablikk, Irpa, Halten East, 702,000 boepd in 2027, powered sharply by the
the electrification of the Njord field, and pro- start-up of Aker BP’s Yggdrasil Hub. Rystad
longing the lifetime of the Snohvit gas field in the expects output to steadily decline from 921,000
Barents Sea through its ‘future’ project. boepd at peak to 818,000 boepd in 2029, 659,000
Other key projects are Shell’s installation of boepd in 2030, and even out at 254,000 boepd
a subsea compression system for Phase 3 of the in 2035. At this point, Yggdrasil, Ormen Lange,
Ormen Lange gas field, Wintershall Dea’s Dvalin Irpa, Breidablikk and Valhall PWP-Fenris will be
North and ConocoPhillips’ Eldfisk North. producing the most. ™

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