Page 9 - Euroil Week 14 2020

EurOil COMMENTARY EurOil
cuts to capital spending. Equinor, for instance, has slashed its budget for this year from $10- 11bn to just $8bn.
The Norwegian Petroleum Directorate (NPD) shed light on the impact weak oil prices are having on exploration and development activity this week.
The count for planned exploration wells this year has dropped from 50 to 40, said the NPD, as operators push back drilling plans until 2021 to save cash. Additional wells could also be post- poned, it warned, and geophysical surveys have also been shelved.
In cases where discoveries are needed to keep ageing infrastructure in service for longer, this will have an impact on future production levels, it warned.
A prolonged downturn will mean operational fields closing down sooner than scheduled, and this would give operators less incentive to find new resources to tie back to these projects.
Development projects will also be delayed because of cost-cutting measures, including those targeting increased recovery. At produc- ing fields, wells that are postponed may not be drilled at all, cutting output in the long run.
As operators look to rein in spending, this will result in job losses, and some skilled work- ers, not easily replaced, may leave the industry.
This would have a major impact on Norway’s suppliers industry.
“Here the oil companies should balance con- sideration for their own cash flow with the need to have a viable supplier industry – even when this is over. It takes time to build a viable supplier industry, but it is very quickly dismantled,” NPD Director Ingrid Solvberg said. “This will happen if workers in the supplier industry have trans- ferred to other industries by the time this is over.”
The situation remains highly volatile, mak- ing it difficult to gauge the overall impact on the industry.
“What we’re seeing is a situation in constant flux. This is why it’s difficult at this time to have an overview of the effect of what’s happening in the industry,” Solvberg said. “We’re following the activity closely. We’re getting the job done and addressing the matters that need addressing. But this is a serious and demanding situation.”
Present market conditions also cast a shadow on Norway’s efforts to attract new investors to its continental shelf.
The country’s petroleum ministry has just proposed adding 36 blocks in this year’s Awards in Predefined Areas (APA) licensing round. This compares with 90 blocks offered in the last con- test, and represents the smallest offering since 2015, when 35 were proposed. ™
PIPELINES & TRANSPORT
Estonian and Finnish firms call on Latvia to delay key gas link shutdown
BALTICS
ESTONIAN and Finnish energy companies have called on the Latvian gas transmission operator Conexus Baltic Grid to delay the planned shutdown of the Balticconnector gas link between Estonia and Finland.
The Latvian company wants to suspend the Balticconnector’s operations throughout May as it will carry out a reconstruction of the Viresi-Ta- linn gas pipeline, connecting Latvia and Estonia. The works will necessitate the shutdown of the Balticconnector, Conexus Baltic Grid says.
But two Estonian energy companies, Eesti Gaas and Alexela, and their Finnish peer Elenger said that shutting down Balticonnector would result in “extensive economic damage”, exacerbating the wider economic risks already brooding upon the Baltic states because of the coronavirus (COVID-19) epidemic.
“The reconstruction works would stop opera- tion of the Balticconnector pipeline for the entire May. The use and volumes of the pipeline have been relied upon by all market participants, and the resulting damage will amount to millions of euros,” the companies said in their statement, addressed to the Baltic states’ governments and
their gas transmission system operators (TSOs). “Due to the fast spread of the coronavirus, the governments, companies and consumers of all the three states have found themselves in an extremely challenging situation, and the need to spend additional millions of euros during the forthcoming months makes the situation even
more difficult,” the statement also said.
The signatories want Conexus Baltic Grid to delay the works for at least one year and also give a longer notice. Conexus Baltic Grid reportedly
only published its plans on March 20. Balticconnector is a gas pipeline linking Esto- nia and Finland. Its capacity is around 2.6bn
cubic metres a year.™
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