Oil market is about to rebalance: Norway

Exports of Norwegian gas to Britain will not be affected by Britain’s vote to leave the European Union, Norway’s oil and energy minister told Reuters.

The Nordic country is Britain’s top foreign gas supplier, accounting for some 40 percent of all supplies in 2015.
Norway’s EU affairs minister said this week the country wants to maintain a good relationship with Britain after it leaves the EU. While Norway is not a member, it pays for access to the European single market and may have to negotiate a new trade agreement with London after Brexit.
“There is no reason to believe that market access for Norwegian gas exporters to Britain will be affected by Brexit. We have been a stable gas exporter and we will continue to be so,” Tord Lien said in an interview.
The minister also said he expects the oil market to rebalance soon, although the exact timing remains uncertain.
“I want to be very clear on that we shouldn’t plan for $100 (oil price) when working with projects. We should aim to establish a cost cutting level which is sustainable at oil prices far below $100,” he said.
He sees signs of improvement in the Norwegian oil industry, which has struggled with spiralling costs and a 60 percent fall in crude prices since June 2014. The sector accounts for 20 percent of Norway’s GDP.
Tens of thousands of oil workers have lost jobs on the Norwegian continental shelf, as oil firms postponed or canceled projects.
“The vast majority of players in the industry see now that costs are being managed and controlled...and that things are starting to turn for the better,” said Lien, adding that he still thinks there will be more cost reductions and lay-offs.
“We experience that many of the projects now have breakeven prices at a level which makes them profitable to produce.”
Statoil said on Thursday it had managed to reduce breakeven prices for its portfolio of non-sanctioned projects to well below $41 per barrel of oil from $70 in 2013.
The minister’s comments echoed the optimism expressed by the chief of the country’s oil directorate, Bente Nyland, on Thursday. Nyland said the worst of the belt-tightening was over and the industry could be turning a corner.
But while investment in new projects is improving, the money is yet to trickle down to the oil supply industry.
“There is no doubt that the supply industry still will experience challenging times,” Lien said.
Norwegian rig firm Songa Offshore said on Friday it expected this year and next to be challenging.