Alis Helene Tefre, President Asia Pacific, Statoil, Singapore
Alis Helene Tefre, President Asia Pacific at Statoil, discusses her company’s presence trading in Singapore over the past twenty years, its newly-opened LNG desk, and Statoil’s aspiration to have more E&P activities in Southeast Asia.
Singapore is still primarily a trading and marketing office for Statoil. Having established our presence here almost a quarter of a century ago, we have naturally expanded our portfolio of services, trading not only crude but also naphtha, LPG, gasoline and LNG. In terms of its global energy footprint, Asia has also grown significantly in importance during that time. Having a presence here therefore not only makes sense, but is critical as well.
Although we have successfully expanded our regional operation over the years, we have had to adapt to our given situation. The volatile nature of energy trading has demanded that we develop an inherent flexibility into our operations to absorb market fluctuations, particularly because we do not yet have any production in the region.
Looking ahead, the progress we are making in the global arena—particularly in Tanzania, but also in Canadian oil sands—presents us with opportunities in the form of volumes that could be well suited for Asian markets. These changes in Statoil’s overall portfolio are enhancing our focus in Asia as a key offtake markets driven by growing demands. In addition to this, we also recently acquired exploration licenses in the Asia Pacific demonstrating a wider commitment to this region and engagement in a wider range of activities over the long term. Without a doubt, we are eager to leverage our upstream capabilities and add production to our regional activities.
Considering the North American energy revolution—driven by Canadian oil sands, US shale developments and the opening of Mexico’s energy sector for the first time in 75 years—what’s your broad assessment of global energy trends on regional investments and demand?
The developments taking place in the North American region, and the US in particular, have certainly influenced the global energy markets. It was interesting for us to see how quickly the shale gas development transformed the US from being an attractive LNG market in as late as 2006, with peaking LNG import in 2007, to becoming a prospect for LNG exports shortly after. We have seen the same development towards energy self-sufficiency on the crude oil side also. This demonstrates just how dramatically things have changed and Statoil is happy to be a part of the US’s shale renaissance. Although the US is not yet exporting any of its crude or gas production, we could have easily expected to see much higher energy prices across the global markets had it not been for those developments. Their relative self-sufficiency has freed up vast volumes for other markets, including energy hungry Asia.
Another interesting implication US shale developments have had for international energy markets is the acceleration of the momentum to exploit similar resources elsewhere. China, for instance, holds a great deal of unconventional energy potential, as does Russia, Australia, Argentina and Indonesia to name a few. In 2012, Statoil entered Australian shale gas exploration licenses, bringing with it the know-how we accumulated in the US. We are currently drilling our first onshore well and are eager to explore the further opportunities. This demonstrates how we have been spreading our competencies to new geographical areas. It will be very interesting to see how the extent to which one can replicate the success of shale in the US and the rapid production build up will impact the global supply/demand balance.
Having entered into an agreement with Petronas in 2012 for long-term LNG deliveries to Malaysia, what’s your outlook for regional gas demand and how does Statoil aim to capitalize on the opportunities that presents?
LNG as an energy source constitutes the greatest growth potential in Asia. Coal too demonstrates strong fundamentals despite the environmental drawbacks it presents. We expect the natural gas demand in Asia to continue to increase and at a faster rate than that of oil.
In the regional context, Statoil does play a relatively small role as an LNG supplier. Although the remote location of our producing asset have cost implications for our shipments, we have taken advantage of the summer time to use the northern sea routes as a shortcut to Asia, narrowing our delivery times and transport costs.
Our contract with Petronas is fairly flexible as is our Snøhvit (Snow White) asset’s production characteristics—a large natural gas field in the Barents Sea. Together with a third-party portfolio we have created flexibility in how we source LNG to fulfill our obligations. Additionally, when we have set up an LNG marketing and trading function in Singapore, it will illustrate our commitment in this region. As of today, we view Tanzania as the second LNG node in our portfolio, although this is still some years ahead. We have developing assets in our portfolio that can support our strategy of becoming more active in the Asian market. In Australia for instance, we expect to produce gas further down the line and perhaps leverage the great LNG infrastructure available there.
What would it take to create a functional, regional natural-gas trading hub in which prices reflect the local supply and demand fundamentals?
This is indeed a key topic dominating industry discussions everywhere. Looking at the regional price differences of natural gas, experts do agree that this is not sustainable in the long term.
Although growing, the LNG market is quite tight. We are seeing a growing number of re-gas facilities coming on stream in Asia while liquefaction capacity has been lagging. Security of supply is also a dominating theme in the region that is driving much of the investments we are seeing nowadays. One consequence of that is that many of the LNG contracts here are long-term orientated and are often quite inflexible. The contract we have with Petronas is perhaps more flexible than what you would otherwise typically see in the region. Unless there is a considerable increase in more flexible volumes, it is difficult to see a rapid development of a spot market.
As we move forward and begin to see more LNG projects coming on stream, partly producing non-committed volumes but also allowing for more flexibility in the contract structure, an LNG spot market will eventually evolve in Asia. As was the case in Europe, these developments take time but we are already heading in that direction.
What are Statoil’s ambitions to expand into upstream in Asia?
Over the past few years, Statoil has been extremely successful in terms of exploration. This has endowed us with a very strong resources base in our portfolio with attractive assets awaiting development. Because of limited resources at our disposal, our investments must be justified by promising prospects.
Having said that, in Asia we have taken a number of positions in countries including Bangladesh, Myanmar, New Zealand, Australia as well as Indonesia. This demonstrates the opportunities we have and our long-term orientation in the region. Growing production organically takes time, and coming from a low base, establishing Asia Pacific as an important producing region for us will take time. There will also be opportunities to accelerate production in the region through swaps or acquisitions, of course, and we will constantly keep an eye on this market.
As a technology and HSE leader, what added value can Statoil offer?
Our leadership in the offshore sector is but one of the qualities we will seek to leverage and deploy in the region. More specifically, we are looking to apply our excellent track record in delivering big and complex projects, high oil recovery factors and high HSE standards. On the other hand, we are also bringing the onshore experience we have recently developed working in the US.
Looking at the bigger picture, Statoil is clearly putting itself at the forefront of industry developments. We like to be where things are happening and where the breakthroughs are being made; be it in the form of employing new exploration models that have defined the success we had in the Norwegian Continental Shelf, making advancements in the Arctic region or in shale resources, or even supporting the development of East Africa as a new energy province. Hence, we like to be where the industry’s newest challenges are, while building up our technological and operational capabilities. Equally as important, Statoil is also strong in the way in which it conducts business by investing in solid relationships and working closely together with the governments and communities where we are present.
I would very much like to see Statoil begin producing in this area. This is perhaps not a time critical goal as I am confident that the growth we are seeing in Asia is one that will persist well into the future.
It is important that we truly appreciate what is happening in this region. The developments taking shape in Asia are shaping the global energy markets. By further expanding our presence here, we are on the right path towards understanding the regional and global markets, which in turn strengthens Statoil’s positioning as a global energy player.