Norway will probably see investments slump by one-fifth next year compared with 2014, when crude reached a peak, as the industry adjusts to considerably lower prices.
Investments by oil and gas companies operating in Western Europe’s biggest producer will fall to NK171billion ($20 billion) next year, 5.6% under a previous estimate, according to a quarterly survey by Statistics Norway. The estimate for this year was little changed at NK192.8billion, but far below the NK214.3billion spent in 2014.
Norway’s oil companies reduced their exploration-spending forecast for next year by 35% from the previous quarter’s estimate, and foresee a “sharp decline” in the number of offshore wells, Statistics Norway said in a statement.
The development threatens to throw Norway’s economy into a recession. Crude producers and service companies such as state-controlled Statoil have announced more than 25,000 job cuts, sending ripples through an economy where one in nine jobs depends on oil.
“It is clear the prospects for the Norwegian economy will be weak next year and for some time,” Marius Gonsholt Hov, an economist at Svenska Handelsbanke, said. While the survey won’t affect Norges Bank’s decision in December, it is possible that oil investments may impact the central bank’s forecasts “further out on the curve from end of 2016 and 2017.”
Norway’s central bank has cut its policy rate in the last year to a record low of 0.75% and signaled the possibility of more easing ahead. The bank’s latest forecast shows petroleum investments will fall 12.5% this year and 10% next year.
Statoil, Norway’s largest oil producer, will probably drill fewer exploration wells offshore Norway in 2016 than this year, it said Monday. Bente Nyland, the head of the Norwegian Petroleum Directorate, said in an interview the total number of wells drilled in Norway will decrease next year.
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