If you haven’t heard of the Norwegian municipality of Norway, we’d wager that you’re not affiliated with the oil industry. After all, Stavanger is widely referred to as the oil capital of Norway, with its history rooted in harvesting natural energy resources and building-related industry activities.
Stavanger is also Norway’s third largest region with an estimated 360,000 inhabitants, making it a pivotal economic engine within the Scandanavian country. It has also been a key player in the oil and gas industry since the mid-1960s, while the last few years have seen firms evolve into sun, wind and bioenergy marketplaces.
In this post, we’ll explore the past and present oil market in Stavanger, before asking what challengings the industry faces in the future.
Then and Now – A Brief Look at the Oil Industry in Stavanger
Most historians trace the emergence of Stavanger’s oil industry back to 1969, following a key discovery in Ekofisk (which is located in the southern North Sea field).
Following this, Stavanger was selected by the Norwegian government to serve as the on-shore centre for the nation’s oil industry, triggering a huge period of growth and expansion within the sector.
This also triggered Stavanger’s transition from a simple industrial trading hub into an energy capital for Northern Europe, with the national energy company Equinor having subsequently based their headquarters in the city centre.
In the modern day, it’s fair to say that the majority of operators on the Norwegian Continental Shelf (which is divided fair between Norway and the UK following an agreement that was forged in 1965) have their headquarters based in the Stavanger region.
According to the most recent statistics, Norway’s oil output is expected to grow by 43% from 2019 to 2024, with the discovery of new fields in Stavanger and elsewhere increasingly the nation’s supply markedly.
During this period, we’ll also see existing production facilities in Stavanger upgraded, with natural gas becoming a key priority for firms (alongside traditional fossil fuels) and creating an opportunity for companies to increase their revenues significantly in the near-term.
What Challenges will the Industry Face in 2020 and Beyond?
Interestingly, this growth has come after two years of lower output, thanks largely to significant technical and maintenance issues in some of Stavanger’s key sites.
Although such issues are unpredictable and generally difficult to plan for, the reversal in production volumes is gradually being offset by the startup of the Johan Sverdrup field and similar entities nationwide. This will lead to increased oil production throughout 2020, with the volumes of natural gas expected to rise to an impressive 117.1 billion cubic metres alone.
However, this will also compound concerns pertaining to demand levels in the global marketplace, which have declined at a disproportionate rate to the supply for years now.
This trend is likely to continue too, with sluggish economic growth in China and the ongoing trade dispute between Beijing and Washington causing oil prices to stagnate and inch towards further decline.
This creates an issue for Norwegian oil companies, who are continuing to increase their supply at a time when the Brent crude price is experiencing incremental declines.
To negate this risk, it’s imperative that firms take stock of their options and look to consolidate their assets, with service providers such as RSM ideally placed to provide comprehensive audits and advice on how to negate any negative market shifts and declines in profitability.
After all, while the city of Scavanger remains a key energy hub and one that is continuing to experience rapid growth, it’s also contributing to a dangerous imbalance between supply and demand in the world’s oil market.