What's Ahead in 2006

Norway takes a longer view offshore

Dr. Terje Overvik, Executive Vice President, Exploration & Production Norway, Statoil, Stavanger

Optimism for the future is growing on the Norwegian Continental Shelf (NCS), because we can see that activity here will last longer than we thought would be the case only a few years ago.

Statoil can look back on 2005 as one of our best years ever, not only on the NCS but also internationally, and we are now raising our sights. We believe that a high output level can be maintained for many years to come. At the same time, our commitment abroad is starting to yield promising results.

High oil and gas prices have, naturally, contributed to the optimistic mood, and given the whole oil industry considerable freedom of financial action. I would, nevertheless, say that our crucial consideration is success as a company in reaching production goals, both on the NCS and internationally.

Excellent results. As the year ends, we can see that our forecast of an average 2005 output of 1.175 million boe/day will be met. This makes us confident that we can realistically maintain our target of producing 1.4 million boe/day from our domestic and international operations in 2007.

Viewed as a whole, we have made important strides during 2005 toward our objective of becoming a first-rate, international oil and gas company. Our production, overall, rose 17% during the first nine months of the year, but it was up no less than 65% in our international operations. Thus, we are close to an average output of 200,000 boe/day from activities outside Norway, with Azerbaijan, Algeria, Venezuela and Angola as the biggest contributors.

Our long-term international commitment is now starting to bear serious fruit. Important new developments in 2005 include our entry into the Gulf of Mexico through the acquisition of EnCana’s $2 billion portfolio. This transaction has given us access to 334 million bbls of proven oil, with an expectation that this could be raised to 500 million bbls through additional discoveries. We also secured two exploration licenses in Libya during the year.

At the same time, as I mentioned above, we have become clearer than ever in describing operations on the NCS as longer-term than we thought a few years ago. Admittedly, we have little prospect of finding more “elephants” in the same class as Statfjord, Troll and Gullfaks fields, but we are still making discoveries.

Increasing recovery factors. Indeed, an important part of our strategy in the years to come is to find resources that can be produced through existing infrastructure. This type of activity is time-critical. Optimum mapping of resources in our core areas will be important. Interesting discoveries are still being made on the NCS, and we believe that access to new exploration acreage off northern Norway will yield results and interesting, future perspectives.

Improved oil recovery has been a crucial success factor on the NCS for many years. After spearheading major developments in these waters over several decades, we now see that some major fields are entering their late lives. Our ambitions include being a leading player for tail production on the NCS.

In an article for World Oil a year ago, I covered the results of success stories on Statfjord field over 25 years. When this massive field went onstream in 1979, we expected to recover about 48% of its 8 billion bbls of stock tank oil originally in place. After a quarter-century of production, we can see that 64% of these resources have been recovered. Our goal now is to raise that recovery factor to 70%.

Early this past summer, we submitted a plan for operation and development of the Statfjord Late Life Project to Norway’s Ministry of Petroleum and Energy. An investment of more than $2 billion will extend the field’s producing life by at least 15 years.

After many years of squeezing more oil out of Statfjord with water and gas injection, we have selected a bold drainage strategy for the late-life phase. This is based on reducing reservoir pressure, allowing us to recover the injected gas for transport to land through existing UK pipelines and sale in the British market.

The Statpipe system celebrated its 20th anniversary this year, having been built originally to meet Statfjord’s gas transport needs. This represented pioneering technology in its day. We laid pipelines in more than 300 m (984 ft) of water and built Karsto, the gas treatment plant north of Stavanger that ranks today as one of the world’s largest facilities of its kind. Our decision to send the remaining Statfjord gas to the UK will free up Statpipe transport capacity for use by fields further north.

Other significant projects. We brought our Kristin development onstream in the Norwegian Sea during November. This project is another bold, important milestone, because the reservoir presents extreme challenges of pressure and temperature, at 911 bar and 170°C, respectively. Kristin has been developed with subsea installations tied back via flexible risers to a floating production platform. Nobody has applied a solution of this kind to a HP/HT field before.

We believe that this project represents valuable experience in an industry that must increasingly adjust to the reality that “all the easy barrels are gone.” Indeed, we see that even more knowledge must be put behind every barrel of oil and cubic meter of gas. At the same time, we are committed – regardless of petroleum price – to a reduction in finding, development and production costs without this being achieved at the expense of safety.

Norwegian operations are moving north. In the Barents Sea, Snohvit is the first development project in these far northern waters. We will start exporting LNG in 2007 from a plant that ranks as the first of its kind in Europe and the most northerly in the world. The LNG terminal at Cove Point, Maryland, USA, will be the most important reception point for Snohvit gas.

This project involves transporting the unprocessed wellstream from a subsea development over a distance of 140 km (87 mi) to the gas liquefaction plant at Melkoya, outside Hammerfest. It represents yet another technological breakthrough for a company that had dared to be a bold, early practitioner of advanced solutions. We have been the leading NCS player for exploration, development and production over many years. Our ambition is to retain this position. Safety is the first priority for our day-to-day NCS operations. Many years of focused commitment to health, safety and the environment have yielded results, but we see a continued potential for improvement.

In my view, our concentration on safety can never be relaxed. Paying daily attention to this aspect is important at all organizational levels. We believe it is crucial for achieving all our goals – technical, organizational and financial.

THE AUTHOR
	Terje Overvik was appointed executive vice president for Statoil’s Exploration & Production Norway business area on Aug. 31, 2004. Previously, he served for two years as the group’s executive vice president for Technology & Projects. From 1983 to 2002, Dr. Overvik held a number of key positions in Exploration & Production Norway, including platform manager for Statfjord A and vice president for Statfjord operations. Before joining Statoil in 1983, he worked as an associate professor and researcher at the Norwegian University of Science and Technology (NTNU) in Trondheim. Dr Overvik holds a PhD in engineering from the NTNU.