Growing inflation will drive investment costs up for Norwegian oil firms- survey

A recent survey by Norway’s National Statistics Office (SSB) indicates that Norwegian oil and gas firms will need to invest more in 2023 and 2024 due to inflation driving up the cost of field development.

PHOTO: Oil pipeline in front of the flag of Norway on oil barrels. Getty Images

Norway-based oil and gas companies will need to invest approximately NOK 232 billion ($21.38 billion) in 2024, including pipeline transportation, SSB estimated.

This projection is NOK 25.3 billion ($2.33 billion) higher than the third quarter’s estimates as elevated inflationary pressures will push the cost of field developments further up in 2024, SSB added. “The higher estimate is mainly due to significantly higher reported cost estimates on some development projects,” SSB said. “These increased costs will probably not contribute much to expanded production capacity more than initially planned,” it further added.

For 2023, the total investment required in the country’s oil and gas sector stands at NOK 216 billion ($19.91 billion), 1.4% higher than the previous quarter’s estimates, SSB further estimated. The rise is attributed to increased costs in pipeline transportation and oil and gas extraction costs.

The increased costs in 2023 and 2024 are associated with new oil and gas field development projects that commenced in December 2022, SSB said. “These [projects] had almost no incurred costs last year [2022], but they have significant investments this year [2023],” it further added.

Moreover, according to the SSB, the decline of the Norwegian Krone (NOK) against the US Dollar or the Euro has also added additional pressure on the existing cost inflation.

By Aparupa Mazumder 

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