Companies operating on the Norwegian continental shelf need to boost production to unlock its full potential and should not leave resources in the ground to save costs, Norway's oil and energy minister Tord Lien said Tuesday.
"Taking full benefit of the huge economic potential in our remaining resources requires active work and continuous investments by the operators on the NCS," Lien said at an ONS (Offshore Northern Seas) conference.
"Producing easy oil only is not in accordance with good resource management and the licence to operate," he said in Stavanger.
Tensions have been bubbling with the oil and gas industry since the last government introduced a more burdensome tax regime last year. The new government, seen as more pro-oil, has refused to repeal the measures.
At the same time, companies have been announcing delays to major developments including the final investment decision on the $15 billion Barents Sea Johan Castberg field, citing rising costs including the new taxes.
"Cost cutting and capital discipline are important tools in order to produce more resources. However, it should not lead to leaving economic resources in the ground," Lien said.
"Fewer projects might produce immediate ripple effects through the supply chain. This may result in a loss of capacity and competence which will again will be needed in the future."
Lien said the industry knew it had an obligation to bring more production into line. "The industry knows it has an obligation as part of the social contract to make sure that the full potential of the resources becomes realized."
"We have seen a happy increase in oil prices... but also the costs per barrel has been increased a lot and therefore cuts are needed," Lien said.
"But cost cuts are needed to make sure more of the potential on the shelf is realized. If cost cutting leads to economically viable resources left in the ground, that is just not in compliance with the social contract to have a licence to operate on the NCS."
MORE PRODUCTION PLEASE: IEA
On Monday, IEA executive director Maria van der Hoeven, also at the conference, said Norway -- one of the world's top 10 oil exporters and the second biggest gas exporter to Europe after Russia -- should produce more, especially gas, to help wean Europe off its dependence on Russia.
"There are no immediate means to replace Russian supplies...in the short run," she said. "And while Norway continues to play a very important role as a reliable supplier of gas to Europe...production levels fell by 6 Bcm in 2013. So, action is needed if Norway is to offset further declines."
A week ago, the Norwegian Oil and Gas Association said the NCS had been placed on a figurative "watch list" by the industry, adding that trust had been shaken by political decisions made without consultation, including the tax change.
"We need political leadership and wisdom which restores confidence after decisions and resolutions by politicians have weakened the world's trust in the NCS," the industry group's director general Gro Braekken said.
The association also said future investment decisions on the shelf might be threatened if measures to restore confidence were not implemented.
In March, Statoil CEO Helge Lund said the group, responsible for 70% of activities on the shelf, re-emphasized its focus on tackling rising costs.
His remarks come after the Norwegian 67% state-controlled group the previous month said it was pushing back 2020 production target goals of 2.5 million boe/d by 3-4 years while prioritizing a war on cost control.
