Norway to Oil Companies: Don't Shut Output

Oil companies operating in Norway should hike recovery rates from mature fields despite falling crude prices, and resist the temptation to shut output earlier than planned, Energy Minister Tord Lien said.

"Companies are obliged to maximise the value of each field to prevent profitable resources from being squandered," Lien of the right-wing Progress Party told Reuters on the sidelines of an industry conference.

"This is something we must focus on, and it is important to communicate to companies that they have an independent responsibility to follow up," he added. "It's important to be clear on this from the government's side."

Lien declined to say whether he was satisfied with the efforts currently made by energy firms in upholding production.

Norway's oil output will drop to 1.53 million barrels per day in 2016 and 1.41 million in 2020 from 1.57 million in 2015, according to estimates from the Norwegian Petroleum Directorate (NPD).

The NPD has previously said that if prices stay low it could accelerate a fall in crude production after 2020 if companies quit fields early or cancel the development of new projects.

As part of its cost cutting effort, state-controlled Statoil (STO) last year postponed a decision on extending the lifetime of its Snorre field to 2040. The upgrade has been estimated to yield an additional 300 million barrels of oil.

"We see a tendency for the companies to prioritise short-term earnings rather than long-term value creation," NPD chief Bente Nyland said in January.

Statoil could also bring forward the planned closure of its Veslefrikk oil and gas field because of low profitability, the firm recently said..

The Norwegian oil major is working on plans to shut production at the North Sea field two years earlier than previously flagged, citing the 65 percent fall in the price of Brent crude since mid-2014.

Exxon Mobil (XOM)'s Jotun field in the North Sea was expected to produce until 2021 but will be shut down this year due to reduced production from tied-in fields.

As a consequence the Jette field, operated by Det norske , will also be decomissioned. A company spokesman said Jette, which began output in 2013, had been a disappointment and that "the oil price development there has been over the past one and a half year has of course not improved the profitability of the field (Jette) very much".

Reporting by Stine Jacobsen