Tord Lien, Norway’s oil and energy minister, has announced that the Norwegian government may unveil measures to cut cost inflation in the country’s oil and gas sector next year.
The proposed measures are a response to the rising energy prices which have forced firms to delay and suspend projects throughout 2013. Costs in Norway’s oil and gas sector doubled between 2005 and 2012. This, combined with lower oil prices and tax increases, has made development of several oilfields a less attractive proposition. Costs increased by an average of 7 percent a year between 2005 and 2012 due to difficulty in drilling wells, rising rig rates and higher labour costs.
Labour costs alone are predicted to rise at an average of 3.5 percent annually through 2018, twice Norway's overall inflation rate, according to the oil industry lobby. Lien's government is consulting with offshore field operators, suppliers, trade unions and government agencies to evaluate which measures will best reduce costs.
Eric Doyle, Regional Director - Europe for Aquaterra Energy, said: “The next few years should prove very interesting for the Norway’s oil and gas industry, as governments and industry leaders across Europe begin to face the challenge of rising energy costs combined with tax increases and lower oil prices.
“Aquaterra Energy is hopeful that new regulations aimed at cutting oil prices in Norway will see the risk of project cancellation and postponement reduced, and that this in turn will help bolster investment opportunities in the sector.”