London (Platts)--20Nov2009/719 am EST/1219 GMT

The Norwegian Oil Industry Association, the OLF, said Friday that parts of the oil services industry were "in crisis" due to a collapse in orders attributable partly to the sector being starved of new exploration areas.

Association CEO Per Terje Vold said in comments published on the OLF website that it had enormous significance for Norway as a petroleum nation.

"The problem we see in the supplier industry today is the result of a sustained policy in which the industry has been denied access to new, attractive exploration areas," he said.

Vold said the Norwegian Continental Shelf was mature and activity was changing.

"The likelihood of making major discoveries in mature areas is small," he said. "Since 2001, oil production has fallen by nearly 40%."

"And the decline will continue, regardless of whether we make new discoveries," he said. "But we can break the fall."

Vold said the remote Lofoten and Vesteralen regions offered the greatest hope for the future of the industry.

The OLF chief's remarks come after Norwegian Petroleum Directorate director general Bente Nyland Thursday expressed fears that the untouched and potentially rich but environmentally-ring-fenced areas surrounding the Lofoten Islands and Vesteralen areas would not be opened up soon for oil and gas exploration.

Norway's oil industry has been pressurizing the government to open up the Lofoten region, located in waters above the Arctic circle.

Lofoten is thought to contain 2 billion barrels of oil equivalent.

Nyland told oil news website Offshore.no she feared the consequences if Lofoten and Vesteralen were not opened up to exploration.

"Then we may have to vacuum all the existing fields," she said.

The oil industry has warned of long term terminal decline if new acreage, particularly Lofoten, is not opened up.

MARGINAL FUTURE

At the NCS Operators Conference in the Norwegian oil capital of Stavanger this week, senior executives at Statoil talked of a new, marginal future for the 67% state-controlled energy giant.

"We are facing a rather marginal future which is quite different from the past," Stale Tungesvik, Statoil senior vice president E&P Norway Reserves, told the conference.

"The NCS is getting to be a mature shelf. In the North Sea we have developed infrastructure which is getting older and the resources are mature," he said. "The big fields are in heavy decline."

Tungesvik said the future belonged to more and more smaller finds, as well as wresting more production from existing fields.

Tungesvik also revealed Statoil is currently running an internal project to try to help staff face the realities of the new future.

"We are in the starting process of something that is very vital for the company," he added.

Vold Friday said those sectors hit hard by the fall-off in orders included field development and subsea contractors.

"New large development projects require that there be new discoveries," he said. "The paradox is that the government assumes that over 40% of production in 2030 will come from resources yet to be discovered."

Vold said that because of the order fall-off there were fears that Norwegian specialist expertize in the offshore industry could be more than halved within a year, if no major new assignments materialized.

He said that for several years Norway's oil industry has been receiving ambiguous political signals from the government. Vold said the government must stake out the way ahead for the country's most important industry.

"We cannot fail to point out that one of the main causes of the problems the supplier industry is now in, is the government's refusal [to act] in terms of the North."

At the Stavanger conference, that sense of frustration was often evident.

Shell Norway acting chairman Reider Saugstad said that the Norwegian Sea could still potentially hold new discoveries saying that within Europe, Norway has been designated by Shell as a growth area.

"If we are to succeed we need to win new acreage," he said. "The last time the industry was given new acreage was in 1994 and since then we have continuously applied for more."

Saugstad said some in the industry now felt that all possibilities have been exhausted. "Our challenge to the politicians is simple, give us more acreage," he said.

--Patrick McLoughlin, newsdesk@platts.com