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Production from Western Europe is expected to show some decline from 2018 onwards. After 2020, new fields in Norway and the United Kingdom will play an important role in helping minimize decline rates and even achieving some output growth in the region. This article assesses the Western European E&P status and outlook, illustrated by the three key drivers: production, exploration success and spending.
Figure 1 shows the total production from the Western Europe region, split by country, from 2010 to 2025. Norway, United Kingdom and the Netherlands make up over 90% of the region’s production. Production has been declining historically due to the natural decline of mature fields, such as Ekofisk (ConocoPhillips-operated), Sleipner (Statoil) and Oseberg (Statoil) in the North Sea, as well as Aasgard and Ormen Lange in the Norwegian Sea. Additionally, production from the Netherlands’ Groningen gas field had been reduced from nearly 1 million boe/d in 2013 to around 0.5 million boe/d last year as a result of government-mandated safety regulations. Nevertheless, in 2015-2016, the region’s total production stabilized at around 7 million boe/d and is expected to stay at this level this year.
The main drivers offsetting the decline are growing volumes from the first phase of Snohvit and Gullfaks South, and recent developments such as Skarv (December 2012 startup), Gudrun (online in April 2014) and Edvard Grieg (2015 startup). Going forward, Western Europe’s production is expected to flatten out around 6 million boe/d by 2021 with key contributions from the redevelopment of the Schiehallion Area in the UK, which began in May 2017, the Clair Ridge project expected to come online in Q1 2018 and the Culzean gas field, which is expected to commence production in 2019. The contribution of Johan Sverdrup, the largest discovery of the last decade, is visible from 2020, when the field is expected to start producing. From 2020 and going forward, Johan Sverdrup is estimated to be the field with the second most significant contribution to production, after the giant Norwegian field, Troll.
Figure 2 shows the discovered volumes in Western Europe from 2005 to 2016. Norway’s Johan Sverdrup field accounts for almost 20% of discovered resources in the region over the last ten years. The field was discovered in the Avaldnes prospect in September 2010 by Lundin Petroleum. Additional appraisal drilling in the Aldous Major South prospect led to a further discovery by Statoil in mid-2011, increasing the resource estimate for the field. In 2012, Statoil made another large discovery in the nearby Geitungen prospect, further extending the Johan Sverdrup field. Other significant discoveries include the ConocoPhillips-operated Jasmine field discovered in 2006 and the Maersk Oil-operated Culzean gas field discovered in 2008, both in the UK North Sea, as well as the 2007 Edvard Grieg discovery in Norway. Additionally, in 2011, Statoil made a large discovery in the Barents Sea, Johan Castberg (formerly Skrugard). Post 2011, the discovered volumes in Western Europe have declined significantly, averaging around 600 million boe per year over the last five years, with most of the discovered resources yet to be sanctioned.
Figure 3 shows the spending in Western Europe from 2010 to 2025. Total spending levels have increased significantly from $77 billion in 2010, peaking at almost $110 billion in 2014, followed by years of reduced activity and investments. Capital and exploration expenditures decreased by 28% and 25% respectively during 2015-2016 and are expected to bottom in 2018 at $26 billion. The recovery in investments is seen from 2019 onwards, triggered by an increasing oil price. However, the level of expenditures achieved back in 2014 is not expected to be reached even by 2025. More than 50% of the current spending is contributed by Norwegian fields, with nearly half of it being spent on projects under development, Johan Sverdrup in particular. A similar trend is seen in the United Kingdom, where a large part of capex is also being spent on expensive sanctioned projects that are anticipated to start producing in the future (e.g. Mariner, Clair Ridge). In the remaining Western European countries investments are being allocated primarily to already mature producing fields.
Conclusion Maintaining a rather flat development since 2014, production in Western Europe is now forecasted to start to decline next year. However, commercial development of already sanctioned projects is seen to help minimize decline rates in the region. At the same time, timely sanctioning and bringing on stream of discoveries is anticipated to help revert the negative growth towards 2025. Investments are expected to start to increase again from 2019, as the development of the major new fields progresses. No significant increase is expected in exploration activity in the region, validating the focus on stable growth from developing existing discoveries and mature fields.
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