Norway expects record investment in its oil and gas sector next year as energy firms capitalise on a boom in the sector, further lifting economic growth in one of Europe’s best-performing economies, Statistics Norway predicted on Thursday.
Oil and gas investments are set to hit 204 billion crowns ($35.1 billion) in 2013, beating the record of 185 billion likely to be set in 2012, and could go even higher as the figure does not include projects which are anticipated but not yet approved.
The agency also raised its forecast for economic growth in Norway’s mainland, or excluding the oil and gas sector which makes up a fifth of the economy, to 3.6 percent for this year from a previous forecast of 3.2 percent made in June, underscoring Norway’s resilience even as other parts of Europe sink back into recession.
For next year, the mainland economy in Norway – the world’s eighth-biggest oil exporter and Europe’s second-biggest gas supplier – is seen expanding by 3.1 percent, a pickup from a previous forecast of 2.8 percent.
“The upturn in the Norwegian economy that started in spring 2011 is expected to continue for at least another four years,” Statistics Norway said in a statement which identified high growth in the energy sector and low interest rates as key drivers of growth.
Investment in the oil and gas industries soared in recent years as high oil prices and an exploration cost-sharing scheme with the government attracted energy firms to both mature areas in the North Sea and the frontier areas of the Arctic Barents sea.
In 2011 the country produced around 2 million barrels of oil and natural gas liquids per day, and over 100 billion cubic meters of gas.
Oil production has been on steady decline since its peak in 2000 but gas output has been rising and overall oil and gas production is seen steady over the next several years.
A string of major discoveries, including the giant Johan Sverdrup field, last year’s biggest find anywhere, has also given the country’s energy sector a new lease on life and the upcoming licensing round is expected to attract back some of the world’s biggest explorers.
The oil investment boom has fuelled economic growth, keeping Norway isolated from economic troubles on the continent. The economy grew by an annual 5 percent in the second quarter, the fastest rate in Europe, while unemployment is 3 percent.
Other contrasts with elsewhere in Europe abound.
As oil revenues remain high, the budget is in surplus, the country has no debt and Norway even saved up $600 billion in a wealth fund, or about $120,000 for each of the country’s 5 million residents.
The stable state finances and a large public sector are also insulating much of Norway’s non-oil related sectors from Europe’s plight.
However the agency also conceded there were possible negative factors in prospect.
Economic growth may be so fast and the energy sector could experience further price inflation and capacity constraints, as the global oil sector struggles to find enough rigs, equipment and people to meet surging demand.
“Some of the investments have been pushed into next year, which is part of the higher estimate for 2013, so this is probably due primarily to limitations in capacity among suppliers,” DNB Markets senior analyst Kyrre Aamdal said.
Oil workers in Norway are the best paid in the world, earning $180,000 a year on average, and some oil companies are worried that wage growth is eroding the country’s competitiveness.
“Investments keep going up and oil prices are high,” said Thina Saltvedt, an analyst at Nordea Markets. “But costs are also high and rising, so the real rise in investment is most likely not as high.
“When prices are high and one has the opportunity to invest, then getting enough workers becomes a problem, especially in Norway.”