Norway's oil industry, already struggling after crude prices collapsed last year, is being dealt another blow as an Iranian nuclear deal promises to boost global supply.

"For Norway's offshore production, it's not that positive," Thina Saltvedt, an oil analyst at Oslo-based Nordea Markets, said by phone on Tuesday.

"Companies on the Norwegian shelf will face tougher competition because costs must be reduced even further to be competitive internationally."

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Oil production in Norway's Arctic Barents Sea, where Statoil postponed a key development for the third time this year, could now be delayed further, Saltvedt said.

Norway, western Europe's largest oil producer, is facing its biggest drop in offshore investments in 15 years as companies delay and cancel projects to adapt to lower prices.

More than 22,000 job cuts have been announced since the beginning of 2014, according to DNB.

Iran, once OPEC's second-biggest producer, will boost its oil exports by 500,000 barrels a day immediately after sanctions are lifted and 1 million barrels a day five to six months later, Oil Minister Bijan Namdar Zanganeh said on state radio Wednesday.

Brent crude fell 1 per cent to $57.92 a barrel as of 11:53 a.m. Wednesday in London.

Many analysts estimate Iran has piled up tens of millions of barrels on floating barges that can be exported soon after sanctions have been lifted. Photo / AP
Many analysts estimate Iran has piled up tens of millions of barrels on floating barges that can be exported soon after sanctions have been lifted. Photo / AP

The benchmark blend recovered on Tuesday after falling as much as 2.5 per cent after Iran reached an agreement with six world powers to curb its nuclear program in exchange for ending 12 years of sanctions that have crippled its economy and capped oil exports.

Brent has dropped almost 9 per cent this month, erasing parts of a recovery from six-year lows in January.

Norway, which has built the world's biggest sovereign wealth fund from its oil riches, has also struggled to stop its commodity reliance from overheating the economy.


It's among the costliest places in the world to do business.

Workers in its offshore industry were the best or second-best paid worldwide over the past five years, according to recruitment firm Hays Inc.

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It costs more to drill a well off Norway than anywhere else, according to a government-commissioned report in 2012.

"The most important focus for Norwegian producers now is to reduce costs to be competitive," said Tommy Hansen, a spokesman for the Norwegian Oil and Gas Association, a lobby group representing companies from Statoil to Royal Dutch Shell Plc and ConocoPhillips.

Still, it also opens up opportunities for Norwegian producers and oil-service companies, according to Saltvedt. Aker Solutions, Norway's biggest offshore engineering company, said it would be interested in returning to Iran.


"If there is the opportunity for our technology we will be there of course," Chief Executive Officer Luis Araujo said in an interview in Oslo on Wednesday.

State-controlled Statoil, which operates more than 70 per cent of Norway's oil and gas production, had no comment on the impact of the Iran agreement, spokesman Morten Eek said by phone. He declined to say whether Statoil could return to Iran, where it doesn't have operations currently.

Norway's krone fell as much as 1.5 per cent on Tuesday against the euro before paring losses and was down 0.4 percent as of 12:57 p.m. Wednesday in Oslo.

"It's a short-term effect linked to the oil price, but also a long-term effect because this changes the fundamental income conditions for Norway," Nordea's Saltvedt said.

Norway's central bank last month cut interest rates to a record low of 1 per cent to support economic growth and said it was prepared to ease again at its next meeting in September.

The government welcomed the "historic" Iran deal, which will allow closer political and economic contact with the Islamic Republic, according to a Foreign Ministry statement.