Offshore Norwegian Development Cost Calculated from Project Data

Abstract

Governments seek to maximize their revenue from mineral resources without taking so much as to discourage investment. To achieve this, an understanding of the cost of production from any given property is necessary. This paper examines a number of proposed developments in the Norwegian North Sea and uses two methodologies to estimate costs in light of reported investment and production data. The results suggest that even $15/barrel will support development in all cases, though one field could be considered marginal, while $20/barrel makes the fields quite profitable, with rates of return ranging from 20% to 40%.