Statoil interview: Norwegians would

Neri Askland on Statoil's potential offering to Abu Dhabi

Carbon capture, GCC, Iraq, Quitting, ANALYSIS, Onshore, Exploration & Production

Neri Askland, Statoil’s country representative to the GCC, on how the company’s offering to the GCC, the future of carbon capture, and quitting Iraq

Statoil has an enviable reputation when it comes to technology, culture and transparency, and is hoping to spread more of its magic in the Middle East as Abu Dhabi prpares to tender is its main oil concessions in 2014 and 2018.

Two-thirds owned by the government of Norway, with the rest of its shares floated in Oslo and New York, Statoil is a combination of a national oil company and a private oil and gas major. The 21,000 strong company has a unique perspective on satisfying the requirements of both governments and investors.

Statoil’s reserve replacement ratio increased from 87% in 2010 to 117% in 2011, its highest for ten years, as the firm booked a billion more barrels, largely through exploration in the North Sea, an area thought to lack the capacity to surprise with any big discoveries.

This month CEO Helge Lund announced that Statoil will now aim for a recovery rate of 60% from its Norwegian assets, a huge challenge given the global average recovery rate of 35%.

The company is looking ahead to 2014 and 2018 in Abu Dhabi, where two rare opportunities to book GCC oil reserves will come up for grabs. With the most experience of any oil company in drilling offshore in water of 100 metres or more, Statoil is well poised for 2018, and may have a role to play.

Statoil has been in Abu Dhabi since 2010. How has the company marketed itself and demonstrated to Abu Dhabi that it has a role to play?
NA: We are focusing in areas where we feel we can add value, in Abu Dhabi and in the region. We are have four areas we are focusing on.

The first is the development of oil and gas in biologically sensitive areas. That’s where we have an advantage, because we have so many environmental issues that we have to consider in our operations in Norway, and have developed practices and technologies that we are able to balance this in a responsible manner.

The second is in the gas value chain. Again, as the second largest producer and exporter of gas to Europe after Gazprom, so we have long experience in handling gas, from production, transportation, operations and marketing points of view.

The third is in Carbon Capture and Storage (CCS). We have a long track record in how to manage CO2, how to inject it into reservoirs and make sure it stays down there. We have been doing that since 1996. There is also an agenda on CO2 which we are seeing more and more elsewhere.

The fourth is about increased oil recovery. There is a lot of maturity on the Norwegian continental shelf. There is a lot of technology is coming out of that region, because we have the highest incentives to increase recovery.

As a result we are seeing some of the highest recovery rates in the world from our fields though continuously improving our technology and practices. We feel we can bring these practice here and employ it in partnerships here.

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On CCS, how do you evaluate Abu Dhabi’s progress so far and how is Statoil involved?
NA: We already have a good operation in Masdar and are exchanging our experiences. We have just started up a plant in Norway at our Mosgstar refinery where we are capturing CO2 after-flue gas, the first project of its kind in the world. We also have ambitions to start capturing flue gases.

There is quite a big difference between capturing CO2 out of pressurised gas than from capturing it from flue gas, and we are sharing our knowledge of this with Masdar. We also hope Masdar is successful in developing its pilot project in coordination with ADNOC.

How widely can CO2 EOR be used in the GCC?
NA: The challenge for CO2 is that its more costly to use it [rather than natural gas] as the EOR gas supply, so it comes back to the price of gas relative to the price of captured CO2.

The question is how much do you need natural gas, and how much does it cost to develop gas. So it’s more of a cost issue. I don’t think that technically it is that big an issue.

Perhaps the economics of using CO2 are more favorable in the GCC than elsewhere because of growing demand for natural gas.
NA: I agree.

The ADCO concessions are coming up in 2014. Offshore in 2018.
NA: We’re looking for partnership options with ADNOC. We have to see where the opportunities come and where there is a fit, where we can add value to ADNOC, it is up to them. To determine where we would add value to them in competition with others.

What were Statoil’s strategic reasons for leaving the West Qurna II field development project in Iraq?
NA: What we decided was to discontinue in that project. When we got to the final investment decision we saw that the project attractiveness wasn’t as high as it was initially, and it then becomes then a pure business decision not to continue.

It was about attractiveness, and attractiveness is about how much cap-ex you spend versus the return you get. ‘Is this the best return we can provide for our shareholders?’ we asked. After a holistic evaluation we found that the attractiveness had gone down.

Is Statoil actively considering a move into Kurdistan?
NA: Everywhere in the world we are always looking at the geological potential of a region and continuously monitoring. We have no concrete activity as of today at least.

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