Oil and gas investment in Norway, Western Europe’s top producer, will rise more this year and decline less in 2021 than predicted a few months ago, an industry survey by the statistics office (SSB) showed Aug. 20.

Petroleum companies, including Equinor, have revived several projects after the Norwegian parliament in June granted tax incentives to spur investment and safeguard jobs after a crash in oil prices sparked by the onset of the COVID-19 pandemic.

Investments in the country’s main economic sector are now projected at 184.6 billion Norwegian crowns ($20.7 billion), up from the 180.3 billion crowns forecast in May, SSB said, and up from 177.6 billion crowns in 2019.

Next year, however, investment is expected to decline to 148.6 billion crowns, compared with the previous view of 145.6 billion crowns, SSB added.

Analysts at Handelsbanken said the expected drop next year will dampen Norway’s overall economic recovery, while DNB Markets said it reflected a lack of large oilfield projects to develop in the years ahead.

The figures for the next year could still be revised up, with oil companies planning several smaller developments, including Equinor’s Breidablikk and Aker BP’s Frosk, SSB said.

Projects approved by the end of 2022 are eligible for tax breaks that shield a greater portion of income.

Norwegian Oil and Gas, an industry association that lobbied for the tax cuts, said the updated forecasts were proof that the package was having a positive impact.

But while oil firms will spend more overall on field development, drilling for new reserves appeared to be declining, SSB said.

“A possible explanation for the downward revision to exploration estimates for 2021 might be that the tax support package ... has, in relative terms, provided a more favorable framework for the other investment categories,” SSB said.

“This may indicate that the oil companies are revising some of their initial plans, by moving some of their leased rigs from exploration drilling to production drilling.”

($1 = 8.9323 Norwegian crowns)