Norway is to consider align its offshore drilling regulations with those of the UK in a bid to slash costs for oil firms in the country.
Drilling costs in the country are among the highest in the world and can be as much as 45% higher for Norwegian operations than those across the North Sea, a report warned in 2012.
The country is looking to address labor costs and simplify rules for offshore rigs to narrow the cost gap in the wake of the report, which was led by former Norsk Hydro chief executive Eivind Reiten.
Now bringing down the costs for rig operations to match those in the UK is an option being discussed by Norway’s new government.
“That’s one of the things we need to consider,” Norway’s energy minister Tord Lien said.
“The need for drilling capacity from floating rigs will become even greater” as more oil and gas is produced using subsea installations without permanent platforms, he added, but warned that while regulations must be reviewed, any change to rules on shifts and wages must be addressed through talks between labor unions and employers.
Norway’s Conservative-led government is looking at measures to reduce costs in Norway’s oil industry, which have risen by about 10 percent a year during the last decade, according to industry consultant Rystad Energy AS.
Cost inflation and a planned reduction in spending by oil companies are threatening future projects off Norway and particularly efforts to increase the recovery rate at existing fields, the Norwegian Petroleum Directorate has said.
Increased costs and taxes led firms to delay major oil projects, including the giant Johan Castberg prospect in the Barents Sea. It also delayed the start of production at the Johan Sverdrup field, the biggest oil find off Norway in decades, and shelved plans for a pipeline at the Kristin field.
“I’m worried about cost development,” Prime Minister Erna Solberg admitted after meeting oil industry figures today.
“There’s a need for a bit more industrialization in the industry itself,” Solberg said. “Some government requirements can be reviewed as well.”
She also warned the oil industry that it needed to ‘copy projects and reduce the amount of hour’.
Among the measures to cut costs being looked at were cuts to bureaucracy and offering greater tax incentives for encourging higher recovery rates from offshore operations. A review of the tax increases levied on oil firms by the previous goverment in Norway is also an option, Solberg said, though no changes are expected before the end of the year.
The move comes amid increasing pressure on UK chancellor George Osborne to offer similar tax breaks and incentives to encourage greater North Sea exploration.
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