Our industry has gone through tough times, and is still facing great challenges. As we try to adjust to the new norm, we must continue to look forward. We know that the world will need more energy, and there will be a need for our products. A viable and sustainable future for our industry means keeping our costs down, making the most of the resources that have been found, and opening new areas for responsible development. Here, we look at four ways in which Statoil is helping to shape our industry for the realities of the future.
Falling oil prices exposed us, showing how we had allowed cost and complexity to increase, far beyond sustainable levels.
CHASING COSTS — A MATTER OF CULTURE
Since the millennium, cost levels in the oil and gas industry have increased substantially. This was a global challenge and not sustainable. Actually, our industry was paying twice as much as we did a few years ago to develop new barrels. Even with high oil prices this was a challenge, and in 2013 we initiated extensive programmes to reduce costs. With the fall in the oil price this work was intensified, not only in Statoil but in the rest of the industry as well.
There were many reasons for the cost increases: more steel per barrel, more requirements followed by increased documentation and a hefty increase in engineering; up to 70 percent. The high oil price caused increased activity, which in turn lead to a heated market.
We come from a culture where we used to chase barrels. Growing demand and climbing prices rewarded us for getting resources into production as quickly as possible. But this recipe will not work anymore.
To be able to realize projects in the future we had to do something—and we could not do it alone. Our contractors and suppliers are responsible for 90 percent of the man hours and costs in a project. By working closely together with contractors and suppliers we have managed to reduce the break even for our operated portfolio of upcoming projects from 70 to 41 USD/bbl—and we’re not done yet.
In 2016 we announced faster cost reductions and an increased ambition of 2.5 billion US dollars in savings each year from 2016. This is a stepping up of our efficiency programme by 50 percent.
We now see an emerging culture where our goal is not only delivering volume with speed, but creating lasting value through the cycles. For our shareholders, and for the societies where we operate.
How did we do it?
Mainly by doing a lot different and setting tough targets.
We are reworking concepts and challenging solutions all the way from the reservoir to the market. We have challenged our own technical requirements and need for documentation. We have standardized, simplified and accepted industry standards and standard documentation as well as reuse of procedures and documentation, and at the same time making sure we don’t compromise on safety.
We are reducing scope: Statoil has challenged “nice to have” and “used to have” - to end up with what we need to have. When you build something leaner you save money, when you work smarter you save money, when you choose standardized solutions you save money.
Together with the suppliers we have chased the smart and standardized solutions, because we have a common interest: Being able to realize projects in a low oil price scenario.
Thanks to this common improvement we plan to deliver two PDO’s in 2016: Utgard (submitted) and Trestakk. Thanks to this common improvement we delivered PDO’s for Johan Sverdrup and Oseberg Vestflanken 2 in 2015. Thanks to this common improvement we are moving forward with major new projects – even if the oil price has been low. We are still working hard every day to reduce the costs to make our industry competitive at all times.
Collaboration and improvements today means opportunities tomorrow.
The volumes we have brought to maturity by means of increased recovery would constitute the largest oil field on the Norwegian continental shelf.
- If we had merely done what we thought was possible when the fields came on stream, many of them would have been shut down by now! Instead, we have achieved much more.
- In fact our installations on the Norwegian continental shelf have together produced some 14 billion barrels of oil equivalents more than we thought was possible when submitting the PDOs.
- This corresponds to six Johan Sverdrup fields
- Or NOK 4500 billion in additional gross revenues at the current price of oil and USD/NOK exchange rate
- This is thanks to good collaboration between the Norwegian authorities, suppliers and operating companies over 50 years. And – this is what we will continue building on for the next 50 years.
Today the NCS is maturing. We face a new reality. Although we are currently feeling the effect of lower prices and reduced activity, this will change. Beyond 2020, there are fewer and smaller projects waiting. And we know that every barrel we produce, every field we invest in, all the value we create, they all start with exploration. That’s why access to new, quality acreage is so important. We are ready to do the job, responsibly and safely, together with authorities, suppliers, and local communities.
Everthing we do, every barrel we produce, starts with exploration. That's why access to new, quality acreage is so important.
The Norwegian continental shelf (NCS) is the core of Statoil’s business.
- Gradually opening up new areas is crucial for Statoil to maintain profitable and high-level production up to and beyond 2030. The award covers five commitment wells – one in the vicinity of Statoil’s existing position, and four in the southeastern part of the Barents Sea, providing access to interesting acreage in a new area on the NCS.
- Exploring in such areas and making substantial discoveries are vital if the NCS is to maintain its production
- We are building on our 40 year-long history in North Norway, and our long experience from Barents Sea exploration.
- Through the Barents Sea Exploration Collaboration (BaSEC) the industry has laid the groundwork for conducting safe and cost-effective drilling.
- We expect to drill the first well in 2017, and will cooperate with our partners to reach this goal
Facts 23rd round:
- 30 % share and operator for exploration licence PL859 40 % share and operator for exploration licence PL857
- 35 % share and operator for exploration licence PL855
- 40 % share and operator for exploration licence PL854
- 20 % share for exploration licence PL858
Capturing renewable business opportunities
As the world’s population grows and becomes more prosperous, we need to provide more energy to heat and light homes, fuel transport and power the economy. At the same time, we must reduce emissions of greenhouse gases.
The Paris agreement is a clear call to action. The future of energy will be low-carbon. We will need a culture and a mind-set, where we look for the opportunities this transition offers.