"The decline compared with last year was primarily caused by the significant drop in demand caused by the Covid-19 pandemic," says acting Petoro CEO Kjell Morisbak Lund. The International Energy Agency (IEA) published its annual report World Energy Outlook 2020 on 13 October. The IEA expects global energy consumption to decline by five percent overall for the year. The report states that the current crisis has created larger disturbances in the energy sector than any other incident in recent history. The IEA projects that demand will not return to pre-Covid-19 levels until 2023 at the earliest.
Substantial revenues for society
"Even in such a turbulent market, the SDFI portfolio is still providing considerable revenues for society," Morisbak Lund says. Petoro manages the State's Direct Financial Interest in petroleum activities (SDFI), which represent a considerable and long-term revenue base for Norway. As of 1 January 2020, the SDFI portfolio was valued at NOK 1,044 billion in a Rystad Energy valuation on behalf of the Ministry of Petroleum and Energy, and Rystad Energy also refers to the substantial contribution from Petoro's activities. In 2018, the portfolio was valued at NOK 1,093 billion, and since then, Petoro has delivered a cash flow of NOK 216 billion.
"Petoro's most important task is to ensure that the values in the portfolio are realised. The objective is also to create additional values through active and strategic work in the joint ventures," Morisbak Lund emphasises. "The Rystad report demonstrates the vast values the portfolio represents for the Norwegian state."
High activity in the portfolio
The operators on the Norwegian shelf deserve credit for maintaining a high production level in this period, in spite of challenges associated with Covid-19. The SDFI portfolio currently has a large number of projects and a high level of activity, both within projects that will contribute toward reducing greenhouse gas emissions, new developments and further developments. "The large, mature fields are still the backbone of our portfolio. Further development of these fields is crucial in order to maintain the production level," Morisbak Lund says, and refers to two of the largest projects, Troll phase 3 and the Snorre Expansion Project.
Work is also under way to complete several new developments, including Johan Sverdrup phase 2 and Martin Linge. "It is well known that the latter project has not developed the way we expected," Morisbak Lund points out. "Our priority is to get the field up and running in a safe way, with a production that can rapidly realise the substantial values in the field. In this connection, Petoro has been heavily involved in assessments of the well situation on Martin Linge, as an example of Petoro exercising its supervisory duty as a licensee.
The Breidablikk joint venture submitted a plan for development and operation (PDO) to the Minister of Petroleum and Energy on 28 September. Breidablikk is one of the largest oil discoveries on the Norwegian shelf yet to be developed and will generate considerable values for society and the owners. The development is part of Petoro's strategy to develop fields by using existing infrastructure, in this case via the Grane platform.
On 28 September, a severe fire broke out in a turbine at the LNG facility on Melkøya. No personal injuries occurred. Equinor is working to establish an overview of the scope of damage, course of events and the causes of the fire. The facility will most likely be shut down for up to 12 months for repair. The incident has contributed to the negative development in the portfolio's serious incident frequency, which is now 1.0 for the last 12 months. "We are not satisfied with this development, and will maintain our follow-up of the operators' HSE work in the licenses, with special attention paid to major accident risk," Morisbak Lund emphasises.
Financial results SDFI as of the 3rd quarter
Net cash flow from the State's Direct Financial Interest (SDFI) in the oil and gas activities totalled NOK 45 billion at the end of the 3rd
quarter, a reduction of 42 per cent compared with the same period last year. This decline is primarily caused by lower prices as a result of the Covid-19 pandemic. Total production amounted to 980,000 barrels of oil equivalent per day (boed), an increase of 41,000 boed compared with the same period last year.
Gas production was 96 million standard cubic metres per day. Liquids production was 374,000 boed, 34,000 boed higher than the same period last year. The increase was caused by Johan Sverdrup starting up in late 2019. Excluding production from Johan Sverdrup, liquids production declined by 11 per cent. This was caused by natural production decline on mature fields, as well as reductions from the fields included in the authorities' revised production permits.
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Christian Buch Hansen
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