Norwegian gas production has been incredibly strong so far this year, up by 6.9 bcm (8.1%) y/y over January–October, putting it on track to come in at a record 123 bcm this year, which would be a 6% hike y/y. With Norwegian gas increasingly filling the gap left by shrinking Dutch output, the question is whether Norway’s stellar production performance can continue, if so then for how long might it do so, and are any structural declines expected on the horizon.
The sharp gains occurred in Q3 17, with output rising by 7.1 bcm (30%) y/y. That summer increase was driven by a historically low level of summer maintenance (with production capacity constraints around 2 bcm lower y/y in Q3 17) and higher gas prices—in August and September prices at the TTF were 40-60% higher y/y.
Production in 2017 is likely to finish the year up by around 6% y/y, but this contrasts with the long-term trend. Production growth had otherwise naturally slowed as the region has matured, with the 2010-2016 compound annual growth rate (CAGR) dropping to 1.4%.
Norwegian proved gas reserves have also started to ebb, from a peak of 2.5 tcf in 2003 to 1.8 tcf in 2016. Of remaining petroleum resources, the North Sea holds about 50%, while the Norwegian and Barents Seas both hold around 25% each, according to the Norwegian Petroleum Directorate (NPD). The NPD’s estimate of undiscovered reserves skews that further north, with almost 50% in the Barents Sea and 25% in each of the more southern basins.
The ramp up in production at new fields is always important for supply. Certainly the 2016 and 2017 start-ups of the Edvard Grieg, Gullfaks Rimfaksdalen, and Ivar Aasen fields helped add to the strength of 2017 production. Following significant investment, Troll gas production is likely to be hitting what looks like an extended plateau, although production could get a modest boost from 2020 if the Troll Phase 3 project is realised.
In 2018, expected new fields are limited but do include the large 8 bcm/y Aasta Hansteen and the Martin Linge associated fields, which are both expected to come online in Q4 18. Together, these two fields account for around two-thirds of all the proved reserves of new gas fields in development on the NCS.
We have modelled the NCS on a field-by-field basis and then forecast this forward accounting for expected maintenance, declines at existing fields and ramping upward at new fields. The result is that we see a period for the NCS where it starts to decline from the peak 123 bcm level we expect in 2017. For 2018, we forecast production will come off by about 5 bcm (4%) y/y to 118 bcm, followed by a 3.8 bcm (3%) y/y drop to 114.3 bcm in 2019 and 113.6 bcm in 2020.