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Tom Dreyer, Vice President Exploration EXP in the North Atlantic, Statoil, UK

06.06.2014 / Energyboardroom

Tom Dreyer; Vice President Exploration EXP in the North Atlantic Statoil expands on Statoil‘s ambition in the North Sea, describing the importance the company puts on informed risk in order to achieve exploration success. Skirting the company’s heavy oil strategy, Dreyer hints at where his company will prioritise their efforts to gain ground.

In the 27th Licensing round, Statoil was awarded 8 exploration licenses. What have been the steps taken forward since receipt of these licenses?

Prior to the 27th licensing round, Statoil only had one exploration licence. Since then, Statoil has sought to de-risk the assets received in the 27th licensing round. Some of them already had firm well commitments associated with them and Statoil is in conversation with partners preparing to drill them. That is in block 28/15, just south of the Catcher discovery- this well will be spudded in June at the asset Wall. The rigs are being moved to the UK currently.

It is of note that Statoil does not engage with HPHT drilling- something other operators seem very eager to do. This costs a great deal of money and Statoil would much rather pursue deeper wells and some riskier prospects. Statoil recognises that informed risk is key to success in exploration.

Malcolm Webb has called for exploration companies to be bolder, and to look away from existing plays to make gains in exploration. What is Statoil’s exploration strategy; what considerations does the company take in deciding where to drill?

The company has three main legs to its exploration strategy. The first is that companies in the UK had mostly been moving like a flock of sheep; chasing the same areas. What happened in Norway was that success had been gained in looking in alternative areas; Statoil intends to follow this sort of play in the UK.

The second is the start of operations at the large field, Mariner and hopefully in the near future at Bressay. Statoil can look for opportunities in the surrounds close to them – in the longer term bolstering production close to the existing infrastructure. In a wider sphere, Statoil can also seek more of these large, heavy oil fields. This is part of our heavy oil strategy. This will require a high production rate per well for success.

Thirdly, is that Statoil has been very focused on the best possible seismic data, using our expertise and obtaining the best possible subsurface image. This is then utilised to inform our drilling programs.

To focus on the big news- Statoil’s move to development of Mariner represents the company emerging as a significant force in the UK. What does this project mean for the company and the UKCS?

It is one of Statoil’s largest projects, both in terms of resources in the ground and in terms of capital investment. With such a large investment, the company has started to build up a larger presence in Aberdeen. We now have 100 staff in Aberdeen, but will be moving towards having around 600-700 staff in the city. This will be a significant presence in the exploration market in Aberdeen.

With such a big investment, Statoil will do everything it can to make the project as safe and as profitable as possible. The business is dealing with heavy oil, a substance almost inherently challenging. Heavy oil and lateral drilling techniques developed in Norway have contributed towards making this project profitable. This is not however, the project that will have the best profit margins for the company; one reason that good data is essential to obtain the greatest revenue achievable. The business will now comb through the area around Mariner and Bressay for developments which can add to the revenue raised from this project.

With the 28th round of licensing fast approaching, Statoil is ambitious to expand again. We would like to triple the amount of licenses we hold- from 9 currently. Statoil is taking the heavy oil strategy seriously.

Bentley, the asset next to your Bressay field saw an extended well test. Xcite energy, Bentley’s owners sold the extended well test (EWT) data to yourselves. This, along with other considerations saw Statoil delay moving ahead with production before reconfiguring a more profitable development plan. What have been the implications of this?

Our business had investigated Bentley and Kraken – fields close to Bressay several times. However we had considered these two assets to be of the second division in terms of attractiveness as assets. When this EWT data was revealed detailing above average production it was Statoil’s duty to investigate.

Following extended conversations with DECC, the business was able to hold onto the license, take into consideration the implications of the test result and will be able to deliver a well development plan again at a later date.

Do you think this information exchange represents the spirit of ‘collaboration’ the Wood Review was talking about? What further benefits can exchanges like this deliver?

Clearly all the smaller companies dependent on a few assets receive different advantages to the likes of Statoil from this sort of information exchange. However, our business is not as strict as some of the other large companies with regard to holding onto information.

In the UKCS, there are around four times as many operating companies as in Norway, and three quarters of these companies are small; some with brilliant minds behind them. Statoil is trying to talk to as many entities as possible to further gain information. If the company can find mutual benefit then that is fine. Often small companies have niche-like ideas which can contribute notably towards developments.

Collaboration could be bolstered greatly through improved means to access infrastructure. Smaller companies at the moment often are unable to access infrastructure, which can strand resources.

Statoil is also not seeking to operate entirely on its own in the UKCS, but would welcome equity partners to work with the business. These could be large or small companies- the preference is only on the utility of what they might offer us.

Last year saw a 41 percent increase in exploration drilling rates in Norway, yet in the UK there were only 47 wells drilled in total. What is the root cause of this divergence?

I was originally surprised that the drilling level was qute so low. I think that one of the reasons may have been that there were too many small players without the financial resources to complete a drilling commitment. The other reason is likely that the rig market was quite stretched, even into this year. Statoil attempted to source rigs on the open market in the UK– which was a troublingly arduous process. Perhaps some other players underestimated the difficulties inherent in obtaining rigs at short notice.

One of the diffirences between Norwegian and regulation here in the UK is that each December DECC/ Oil and Gas UK approaches our business to ask about our predictions for work program for the coming year; wells, seismic, everything. The industry here often over predicts its activities. In Norway, it is discretionary to report activity proposed for the year and there tends to be less ‘talking up the game’ in Norway.

Over the last five years, Statoil’s exploration efforts have seen a success rate of 70 percent success compared to an industry average of 49 percent in the NCS. What strategies and technologies has Statoil employed to deliver this, and how might these qualities be brought to the UKCS?

I was previously the exploration manager for Statoil in the Norwegian North Sea. One of the reasons I am here now is to emulate the same techniques here- a technology focused approach. A significant figure has been spent on trying to obtain the best possible data both in terms of purchasing and internal processing of information. We have recruited a good number of specialists to deliver this. Statoil likes to promote itself as a technology focussed company and fortunately our business has the capital to deliver this; three quarters of the companies in the UK do not- they are too small.

Statoil however, is less tied down in bureaucracy than the likes of some of the supermajors. Particuarly with regard to exploration, the company can move very quickly when required. The combination of Statoil’s long experience, its ability to act like a small company, combined with the resources of a larger one is a reason Statoil is so successful. A secondary factor is that over time, the business has learned to be brave with its exploration efforts.

Statoil in 2012 declared in its technology strategy seismic imaging and interpretation to be one of four key areas for technological development. Since then, how has the company continued to develop these techniques, and are there any other areas of particular importance?

Of number one importance is still seismic imaging and interpretation. It is the key to the subsurface. However, currently some smaller companies are offering innovative techniques and technologies. There are always experts coming up with good ideas and Statoil is eager to listen to considered offerings.

A second key area that the business is looking at is reservoir distribution in the subsurface- the geology side of things. Where Statoil has failed in the last three or four years, it has been often due to poor understanding of the reservoir itself. This is an area of increased emphasis for the company.

Thirdly, EM (Electromagnetic) techniques are a novel development, and we are now taking these quite seriously. We have a collaborative deal with EMGS to move forward on this front- our business is more positive about the prospects of this technology than we were two or three years ago.

Lastly, improving drilling efficiencies is important. This is principally engineering, improving the well design. Given that drilling is one of the most significant cost drivers we have, the simpler we can make the wells, the better.

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