Delays in projects, particularly to increase recovery from operating fields, risk leaving oil permanently in the ground, depriving Norway of vital budget revenue and shortening the lifetime of fields in an already mature area.
“We are doing the socioeconomic calculations and we are working with a 4 percent rate of return but when the industry is working with 6-8-10-12 percent, then we have a real problem,” Nyland told Reuters on the sidelines of a conference.
“Projects that are very profitable from a socioeconomic perspective are put on hold because companies are expecting too big a margin; there is a big gap between what they see as profitable and what we see,” Nyland said on Wednesday.
h/t Adrian
Oh my! We can’t have the parasitic leviathan wealth redistributing state deprived of projected revenue (skim) simply because private operators have profit margins linked to ROI – heaven’s no! Quickly nationalize the patch and this will all go away -ask Chavez.
So typical of these socialist parasites they want all the revenues but none of the risk capital.
BEST LEAVE IT THE GROUND FOR OUR CHILDREN’S CHILDREN. OR NOT
Score Socio-economists:0 Capitalists:1
Pump it yourselves if you are so smart. You might get your hands dirty though.
4% ain’t much of a return. As the price of oil has plunged by 30% since June 2014, the oil companies have already taken a big pay cut.
If that hurts the Norwegian welfare system, which I suspect is as socialist cradle-to -grave as they come,perhaps the government had better look for other sources of income accompanied by a coherent plan to cut State welfare costs.
Do they not understand the idea of Capital rationalization?
Any company will have hundreds of potential projects they could choose from but only enough resources to pursue a small percentage of them. Why would they even consider projects with a 4% return when finding a project with a 10-20% return is as easy as grabbing the next idea in the pile?
Oh Don you have no idea how bad the socialism is in the medias darling Norway. The young boys who dont want to work offshore have either the Ikea or some stuffy museum to work in after the Mcdonalds wont hire them, yea they have free dental free medical and 80 percent taxation, plus 500 billion in the bank oh wow 500 billion not helping anyone but the Gro Brunt Harlan crowd. The suicide rates of Norway and Sweden amoungst young men is astounding, I spent 4 months there and if a pissed off loser with a couple of guns can take out 75 people just think how easy pickins that 500 billion will be for Vlad when he needs to top up the bank account as his oil wealth goes south. Socialism is spreading the misery to anyone not at the top of the socialists list of friends, and stealing wealth from those that take risks drilling for oil is never a good idea in the long run, Turdeau/Lalonde Chavez and here in Alberta we had a fellow try it, cant remember his name…
Stelmach
4% is F All
Most oil projects are tested with a 10% PV hurdle.
mostly that is to take care of things like the 30% drop in oil price alluded to by don morris.
If the statist wants the 4% project to go ahead, he has to guarantee it.
Won’t happen.
OIl sands projects are often targeting rates of return north in the 12-15% range – and any international oil company looking for an investment can make at least 10% on a deep water offshore project in west Africa or shale plays in the United States. If Norway wants projects to go on 4% return they are going to have trouble finding anyone stupid enough to invest when you can make a lot more elsewhere. Also, considering inflation is running in the 2% range, that cuts such a paltry return in half…
Norway is deluding itself.
Typical socialist mindset. They know better than you how to run your businesses and how much ROI you should be happy with.
“Projects that are very profitable from a socioeconomic perspective ”
I can’t even translate this from socialist-speak to english.