Norway's Petoro to double spending just to keep oil output flat

Wed Feb 26, 2014 12:10pm EST

* Says cost inflation may lead to project cancellations

* Norway's oil and gas revenue NOK 124.8 bln in 2013

* Down from NOK 146.9 bln in 2012

* Petoro's output falls 9 pct to 1.034 mln boed in 2013

By Gwladys Fouche

OSLO, Feb 26 (Reuters) - Norwegian oil firm Petoro said rising production costs will force it to invest twice as much money in the coming years than it did in the past just to keep oil and gas output from falling.

State-owned Petoro, which has no operations of its own but manages the Norwegian state's interests in offshore oil and gas fields, said cost inflation could lead to the cancellation of several developments in which it is involved.

Costs in Norway's oil industry roughly doubled between 2005 and 2012, which together with lower crude prices and a tax hike last year has made the development of several oilfields a less attractive proposition.

"Petoro's projections show that for the next few years annual investments will be in the order of 40 billion Norwegian crowns, or twice as high as in the period 2005-2011," the firm said in a statement as it released its annual results for 2013.

"But the trend for oil production will remain limited to a flattening of the decline that has taken place since 2001."

Higher costs and lower gas sales cut the Norwegian state's revenue from oil and gas production to 124.8 billion crowns ($20.6 billion) in 2013 from 146.9 billion crowns in 2012, Petoro said.

Cost inflation has already led oil companies to cancel or freeze several projects. Statoil has already put on hold the development of its $15.5 billion Johan Castberg oilfield in the Arctic.

On Thursday Petoro said another possible casualty could be the installation of a new drilling platform at the Snorre field in the North Sea, which could have facilitated the production of an additional 240 million barrels of oil.

The choice of platform was supposed to be decided in the first quarter of next year, followed by an investment decision at a later time.

"We must work hard from now until the investment decision to make the project more economically robust," Grethe Moen, the head of Petoro, said in the statement.

The partners in the Snorre field include Statoil, ExxonMobil , Idemitsu, Total, Core Energy and RWE Dea.

Petoro's oil and gas production reached 1.034 million barrels of oil equivalent per day in 2013, down some 9 percent from the 2012 level, the company said.

Petoro was due to publish its results for the fourth quarter and for full-year 2013 on Thursday at 0900 GMT. It accidentally published them on its website on Wednesday. A Petoro spokesman said the statement was genuine.