Lower commodity prices have resulted in the delay or scrapping of 10 Norwegian offshore projects as companies seek cost reductions, forcing Wood Mackenzie to shave $50 billion off its 2016-2020 investment forecast for Norway.

Sinking profits brought on by the world’s supply-and-demand imbalance—the result of a global abundance of hydrocarbons—have pushed oil and gas companies to optimize their operations by seeking out drilling and operational efficiencies and other avenues. The pursuit of lower costs is expected to continue.

“We can’t change the oil price, but we can look to bring costs in line with it,” Malcolm Dickson, principal analyst for upstream oil and gas for Wood Mackenzie, said Aug. 29 in a statement. “The most prevalent type of optimization has been simplification of projects, such as moving to lower-cost drilling techniques, scaling down vessel specs and moving from large platforms to subsea.”

Statoil, for example, said it slashed development costs for the Johan Sverdrup project offshore Norway by 21% to $12 billion. The lower costs were attributed to “higher drilling and well efficiencies and high-quality project planning and execution.”

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A Statoil Arctic project, the Johan Castberg oil field development in the Barents Sea, has also seen its costs cut by half to about $5 billion or $6 billion. Plans for the project include use of an FPSO vessel, eliminating the possible need for a pipeline to a new standalone oil terminal. Developers had previously considered a production semisubmersible.

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The projects, however, are among those awaiting a final investment decision (FID). A decision for Johan Sverdrup is expected in second-half 2018, while word on Johan Castberg could arrive in 2017.

Offshore companies are also working to cut expenses in other ways.

“Companies are seeking lower-cost solutions, be that from cheaper market rates or different development options,” Dickson said. They are also seeking standardization, collaboration and improved technology.

Wood Mackenzie pointed out new technology approaches such as Åsgard’s subsea compression. Statoil and its partners put the world’s first subsea compression facility online in 2015 in the Norwegian Sea. The compression was part of an effort to maintain pressure needed to continue high production from the Mikkel and Midgard fields. Subsea compression added about 306 million barrels of oil equivalent (MMboe) to the total output over Åsgard’s field life.

“While costs have come down, there’s a lot further to go,” Dickson said of offshore oil and gas projects.

Among the areas with the most cost deflation so far this yearbased on Wood Mackenzie’s research, are subsea equipment, drilling and seismic. The biggest cost reductions are forecast in the areas of seismic and drilling, “where a vessel oversupply has meant expectations of a 20% drop this year.”

Wood Mackenzie estimates there are about 3 Bbbl worth of pre-FID projects awaiting sanction. The timing of these decisions will play a crucial role in the developments’ costs.

The firm believes the market will bottom out in 2017.

However, “mid-2017 is the bottom if you believe in oil price recovery, as we do. That means that cost inflation will begin to creep into fields from 2018 onwards. FID in the next year or so would make sense to capture lower costs,” said Dickson. “However, cost optimization can trump everything. Too many of those projects have breakevens in excess of US$50 a barrel—and simplification, standardization and optimization,--not cyclical benefits--are the keys to new investment.”

Velda Addison can be reached at vaddison@hartenergy.com.