Page 6 - AsianOil Week 01 2021

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depend on the government’s ability to distribute provide so much support is hardly surprising,
recently approved vaccines effectively. given the major role that oil and gas plays in the
New Delhi has already come under fire for Norwegian economy. The incentives package led
its poor handling of the national lockdown, as to a flurry of new investment announcements.
well as its use of specially run trains to shuttle Many of these projects had been shelved at the
stranded migrant workers back to their villages. onset of the crisis.
The latter strategy effectively rendered the first Exploration in Norway has also fared better
null and void. than in the UK, in large part thanks to the coun-
try’s supportive fiscal regime. Norway allows
Europe: North Sea remains profitable companies to deduct almost 80% of their explo-
The mature North Sea region has a reputation for ration costs from taxable income.
comparatively high production costs. But oper- At the same time, Norway also imposed its
ators worked hard after the 2014 oil price crash own cuts to production this year, in a show of
to cut expenses, which made the sector more solidarity with OPEC+.
resilient in the face of the 2020 market collapse.
As such, most North Sea production remained FSU: Tighter margins
profitable even at the height of the market cri- As members of the OPEC+ alliance, Russia,
sis in April. This said, the downturn has led to Kazakhstan and Azerbaijan committed to dras-
a significant drop in investment, particularly in tic cuts to their oil production this year.
the UK. Russia alone took over 2mn barrels per day
Prior to the coronavirus pandemic, UK of oil supply offline beginning in May. It restored
operators were expected to take final investment 500,000 bpd in August and expects to bring a
decisions (FIDs) on 14 upstream projects this further 125,000 bpd back on stream this month.
year. All but one – namely, Apache’s approval Further increases will be negotiated with its
of the Gair oilfield before the market crisis took OPEC+ partners on a monthly basis.
hold – were delayed. Producers have implemented these cuts
The number of wells sunk in UK waters more by closing down older, less profitable wells at
than halved this year, with exploration drilling mature fields in Western Siberia and the Vol-
seeing the biggest decline. The lull in activity will ga-Urals region. They have also delayed growth
weigh down on production numbers in the years at greenfield projects in the Arctic and Eastern
ahead. Siberia. The risk is that some mature projects
The UK government provided support to the may never return to operation, undermining
industry in the form of its job furlough scheme long-term prospects for Russian oil supply.
this year but has not offered any tax relief. It has Russian oil producers boast some of the low-
also delayed publishing its “transformational” est production costs in the world. But the out-
sector deal, promised by the UK Conservative put cuts, combined with weak oil prices, have
Party in its 2019 election manifesto, which aims squeezed their margins considerably.
to support the industry through the energy During the 2014 oil price crash, the ruble’s
transition. resulting collapse wreaked havoc on Russia’s
Norway, in contrast, provided the industry finances at large. But it also helped prop up Rus-
with some NOK100bn ($10.6bn) in tax relief in sian oil firms’ earnings by inflating the value
June, in a bid to help companies stay afloat and of their exports. This time around, they have
continue investing. The country’s willingness to enjoyed no such relief, as Russia’s government

P6 www. NEWSBASE .com Week 01 07•January•2021