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Interview

with Åke Hesselbom, Managing Director, Mærsk Olie og Gas AS (Maersk Oil)

01.08.2012 / Energyboardroom

There isn’t much public information available about Maersk Oil’s Norwegian operations since it entered the country in 2003 by licencing exploration acreage with Norsk Hydro in the Norwegian Central Graben. What is the strategy here, and what is the role Norway plays in the company’s overall portfolio?

Maersk Oil began in Denmark in the early 1960s, operating the DUC with Shell and Chevron. Norway is a natural progression from the company’s 15 producing fields in Denmark. Maersk Oil operates 95% of Danish gas production and 85% of Danish oil production, mostly from tight chalk reservoirs, and had to develop special techniques and expertise to produce the oil and gas. Then in the UK, Maersk Oil bought Kerr-McGee’s UK assets in 2006, which included 12 producing fields and also a significant number of discoveries and many exploration licences. Maersk Oil therefore developed a very strong position in the Danish and UK sectors of the North Sea and a move to Norway was natural. Our strategy is to utilise our chalk development and production expertise, and our exploration and other knowledge in many other plays from the UK side. We are now creating a single technical environment for the North Sea. We are also looking at the areas in Norway which demand new concepts and play types not found in Denmark and the UK.

You mention Maersk’s technological advantage and experience, particularly in low-permeability, high-porosity chalk and limestone areas. Can you speak to this and how the knowledge has been imported to Norway thus far?

In the Danish sector we had to learn how to develop low permeability Chalks that would normally be considered non-reservoir, such as the 0.5 mD Halfdan Field, which is currently producing close to 100,000 bopd. We exported this expertise to a large oil discovery in limestones in Qatar ” Al Shaheen ” that was also thought to be impossible to develop commercially, and where we are now producing more than 300,000 bopd. In Norway we are looking at areas of exploration interest, and undeveloped discoveries in Chalks and other reservoirs, to see where we may be able to make low permeability discoveries commercial. We then need to acquire or enter the acreage, and that’s one of the main challenges. We have been fortunate to develop a good relationship with StatoilHydro, as evidenced by our joint award of a licence in APA2008 with chalk potential.

In some of the frontier areas you mention, there are some sensitivities around their opening. The government’s strategy has been step-wise and patient ” how do you envision opening up these areas to the highest mutual benefit of both private and public interests?

Maersk Oil is a newcomer in Norway, although not in the North Sea. We also have licences in the mature area in mid-Norway. Further North, in the Barents Sea, we are currently undertaking regional studies to understand the plays and prospectivity.

There’s a great concern of many stakeholders in these areas, and it’s important to find a balance between them all, from fisheries to environmentalists and so forth.

It is also important to say that our UK and Danish experience leads us to believe there could be a lot of additional potential in the mature areas of the North Sea. In these areas there are fewer environmental concerns, and there are existing facilities which will be utilised efficiently if we explore in the nearby acreage.

Looking to some of the company’s global operations, we see technical innovations with the world’s longest horizontal wells at over 10km for instance. As you move north in a country well-known for encouraging technological innovation, what kinds would you like to see brought to Norway from Maersk?

Enhanced oil recovery and utilizing our technology for low-permeability reservoirs is one of the main areas of expertise to contribute that may not have been utilized to the full extent in Norway.

We are also able to look at old discoveries and abandoned fields with new eyes. For example, the Dumbarton Field in the UK, has now been brought back on stream. This may also be relevant in the Norwegian sector.

As Managing Director in Norway, what’s at the top of your priority list?

From a technical point of view, it’s to get access to exploration and producing acreage. From a financial point of view, it’s weathering the storm.

How is your financial perspective?

Maersk Oil is part of a group comprising over 115,000 people. Of course, the financial crisis affects each part of the business differently ” and there’s everything from frontier hydrocarbon exploration to supermarkets. As an oil company, we’re fortunate that most of our fields generally are profitable at today’s oil price. In this respect, it’s helpful to have this variety of activities.

On a more micro level, how would you define your managerial style and philosophy?

Maersk Oil is a very team-oriented and hierarchically flat organization. We work very closely in building a multi-disciplinary Growth team, and it’s quite easy to achieve this, not being more than 20 people. Within this team there are disciplines from Business Development, Reservoir engineering, and geology and geophysics. We all help each other to achieve the team objectives, and always consider what will add most value, performing the most appropriate level of work for each project. We are looking for people who can think laterally, look at the petroleum system of a whole basin, and come up with new ideas. It is very important that people we employ are good team players. Everyone in the group is part of the entire process. If you’re a geologist or seismic interpreter, you aren’t just sitting and producing maps, but you have to be part of a whole project from start to end. People can be involved in everything from mapping to the commercial side ” you follow the projects through and own them. Since we have few people and many balls up in the air, we have to be flexible and prepared to manage a project at the same time as your partner or team-member at another project. It’s very integrated.

At around 1%, Stavanger has the lowest unemployment rates in Norway. How has been attracting the necessary talent?

It has been extremely difficult to get people. We are very concerned in this regard, and because there is a limited number of Norwegians on the market, we must often source from overseas. We are seven or eight nationalities at the moment. This has however had the advantage of making an unusually good team to be part of.

A potential recruit could be forgiven for worrying about feeling like a number, as one of over 115,000. Given that Maersk Oil Norway has this small company dynamic within a much larger entity, can you explain the unique value proposition here?

The oil business is about 3,000 people, and the office here is small and very integrated. People who come here can really make a difference because they get a very large responsibility from the beginning. It doesn’t matter if they’re young and rather inexperienced, older and experienced, or a consultant, they all get exposed and are responsible for their own projects at the same time as their team members. Any good idea will be acted upon, and everyone gets the chance to attend exploration and management meetings, and each person plays an active role. At the same time, we give especially the younger staff members an extensive training both here in Norway and internationally, facilitated by a large cooperation and a borderless environment between Copenhagen, Stavanger and Aberdeen. We also offer our staff the opportunity to be based in Stavanger but to be eventually posted to one of our overseas organizations, which for a Norwegian can be quite an attractive proposition. For young employees, Maersk Oil has developed a large technical and business rotational training program similar to what has been available on the shipping side for many years. There are two trainees from this program in Stavanger, one currently in Copenhagen and the other set to move to Qatar. They will go for eight months on rotation, and come back to home base in Stavanger. All in all, it’s an excellent opportunity for cross-pollination.

Speaking of the broader context, the prognosis for the North Sea has not been overly promising in the last while. “North Sea oil boom is over” read FT headlines in February, and just last week there were press releases stating 78% less exploration comparing Q1 2009 with Q1 2008 in the UKCS. But these statistics offer an asymmetrical affect on the market; how do you see the attractiveness of the region going forward as an attractive investment destination for Maersk Oil?

In the UK, we are in about ten discoveries in the North Sea, including discoveries in the high success rate HPHT play. We believe this demonstrating additional North Sea potential in the UK. By comparison, Norway is under-explored, and possibly like the UK 10 to 15 years ago, so we believe there is a lot of exploration and business to be done in the North Sea in Norway. However, it’s correct to note that the larger oil pools in south and central Norway, the easy ones, have been found, and now it’s the more subtle or deep, high pressure high temperature, traps remaining. But this is not news. For Maersk Oil, it’s a matter of in the southern North Sea utilizing our technology and UK play concepts, it’s just a matter of access to acreage. Further north, we’re talking about mid-Norway, where we are present and which we find interesting. There are also frontier areas with what could be a huge potential, but that still remains to be seen. You can see that activity in the Barents has picked up again, but not many larger discoveries have been made there in recent years.

Looking at the five to 10 year time frame, what are your ambitions for the company over that horizon?

Our ambitions are to establish Norway as a core country for Maersk Oil, which means significant oil production and a high value portfolio of exploration opportunities. Maersk Oil is focusing on what we’re good at right now, establishing the core, and then in parallel building the portfolio of exploration opportunities.

As you build this portfolio, what is your final message to potential partners, government, or maybe even new recruits?

We believe we can provide an exciting place to work for potential recruits, and that we can offer value to potential partners due to our expertise and North Sea-wide focus. It’s our long term vision for Norway that we really want to establish ourselves as an important oil and gas exploration and production company in the country.

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