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Image courtesy of /Tom Haga/OLF.

A new report by industry group Norwegian Oil & Gas (Norog) said offshore investments in Norway will drop during the next three years as slumping oil prices and rising costs force companies to cutback on new projects.

Norog expects investment in exploration, development and operating fields to fall to about $28.82 billion from this year’s record level of $32.3 billion.

The group is projecting that investments will drop until 2017 to a low of $27.8 billion but expects investment levels to recover to $30 billion in 2018 and $28.97 billion in 2019.

“While the peak will be passed this year, investment and activity on the Norwegian continental shelf will remain at a historically high level and continue to require substantial capacity at both oil companies and suppliers,” Norogo said.

Norog’s report calls the slow down a “correction” following the recent jump in activities that sent costs up and hit profit margins.

However, the group expects a “relatively robust” investment level of above $27.8 billion per year during the next few years assuming oil prices hover around $85 per barrel.

Norway’s Statoil, the country’s largest upstream, has been cutting back investments, suspending rigs and shelving projects to bolster its bottom line as costs skyrocket and oil prices remain weak.

Norog said no companies have submitted plans for new field developments to the government following last year’s tax increase.

The group also said a recent round of major modifications on existing fields will curb new investment in the coming years.

More rigs are expected to exit Norway during the next few years as multiple rigs come off contract in 2015 and 2016, pushing down production and exploration drilling as well as dayrates.

“Given oil companies’ requirement to reduce costs, rig owners will probably seek contracts overseas and therefore also cost reductions, instead of accepting lower dayrates off Norway,” the report said.

Norog director general Gro Braekken believes the Norwegian industry could see a spike in consolidation as companies try to cut costs and increase profitability, Upstream said.