Industry in Norway

Norway - Industry

Industrial production rebounds in February, as oil and gas extraction picks up

Industrial production increased a seasonally-adjusted 2.6% in February over the previous month, which was down from January’s upwardly revised 2.2% decline (previously reported: -2.3% month-on-month).

February’s rise was driven by a strong rebound in the extraction and related services sector, which accounts for around 65% of industrial production in Norway. Meanwhile, output in the electricity, gas and steam sector increased notably, but manufacturing, mining and quarrying production decreased in February over the previous month.

In annual working-day adjusted terms, industrial output surged 5.4% in February—the highest outturn since September 2017—up from the 0.3% expansion in January. Meanwhile, the annual average change in industrial production was minus 3.7% in February (January 2020: -4.6%).

This year, activity in Norway’s oil and gas industry will likely soften due to containment measures around Covid-19 weighing on global energy consumption. Production levels are expected to be maintained, but exploration efforts have been reduced, offshore installations have been put on hold and investment has been curtailed.

The dramatic fall in global energy prices could have an impact on future resources as the falling profitability of discovering new wells would not justify the exploration efforts. Nevertheless, Norway’s new generation of oil fields particularly the Johan Sverdrup should support output this year. The Johan Sverdrup operates at a cost of roughly USD 2 per barrel of crude oil and consequently could weather the current decline in global oil prices. Moreover, production estimates as of late March may exceed its initial target of 0.44 million barrels per day (mbpd) by 0.03 mbpd in Q2, which would be notably higher than April’s average output expectations of 0.43 mbpd.

FocusEconomics Consensus Forecast panelists project that industrial production will decrease 0.3% in 2020, which is down 3.0 percentage points from last month’s projection, and to expand 3.6% in 2021.