Cash flow to the Norwegian state from its holdings in oil and gas assets dropped 73% year-on-year to only Nkr7 billion ($780 million) in the second quarter as it was hit by lower oil and gas prices due to global energy demand destruction in the wake of the Covid-19 pandemic.

The figure reported by state oil holding company Petoro in its first-half results was the lowest since it was established in 2001, with cash flow for the six-month period down 43% over the year at Nkr34 billion.

Income from the state’s direct financial interests in oil and gas fields held by the company accounts for about one-third of petroleum-related revenue to be deposited in the country’s massive sovereign wealth fund, which was budgeted at Nkr245 billion this year before the coronavirus struck.

"The cash flow reduction is a direct consequence of the global challenges for the oil and gas industry," Petoro chief executive Grethe Moen said.

"Over the short term, this will have an immediate impact on the state's revenue from our portfolio.

"Despite the oil and gas companies being better equipped to face this crisis than they were for the previous price collapse in 2014, the current situation causes significant uncertainty as regards the long-term consequences the pandemic will have for the industry.”

The reduction in cash flow came as the company recorded an average oil price of $37.80 per barrel for the first half, down from $66.70 a year earlier, despite seeing oil and gas sales remain relatively flat at just over 1 million barrels of oil equivalent per day.

Liquids production of 379,000 boepd during the six-month period was up 10% over the year, fuelled by rapid ramp-up of output from the giant Johan Sverdrup field, though gas production fell 11% to 95 million cubic metres per day.

"It's very positive that the Covid-19 situation has not led to a halt in production and that operations have been maintained through a very demanding period,” Moen said.

Moen said a recent tax stimulus package approved by the government would boost investment in new field projects to generate revenue for the state, with Rystad Energy estimating it could result in 15 to 20 schemes being realised — including Breidablikk in the Grane area of the North Sea, in which Petoro is a partner.

Finance

Petoro sees cash flow plunge on demand collapse due to Covid-19