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Interview

with Helge Hatlestad, Managing Director, Statoil UK

02.12.2008 / Energyboardroom

Statoil and the oil and energy division of Norsk Hydro merged in late 2007 to form StatoilHydro. One year out, CEO Lund has said the first year was “hectic and demanding”, but how would you assess the impact on UK operations?

The merger’s impact has been positive in many ways. In the UK, Statoil was the more dominant company, and Hydro had a relatively limited presence within E&P. In many ways, it’s the Statoil part which has continued, but with some interesting additions, most notably with the heavy oil fields of Mariner and Bressay, a project Hydro was working on before the merger. In addition to E&P, there is also a trading office for oil and gas, which represents slightly more than half the organization at the moment, but with the success of Mariner and Bressay it will be on the E&P side where the company grows in the future.

Bressay, Mariner, and East Mariner were acquired from Chevron in late 2007, representing the first operatorship for StatoilHydro in the UKCS. What is the project’s current status?

It’s still early days for that project, and based on the current timelines when StatoilHydro was granted operatorship, licenses, and partner acceptance, the company committed to a work program to achieve sanction within two years, meaning 2010. The first year has been about acquiring more data, with different seismic surveys completed during 2008, and wells drilled at Bressay as well as a smaller nearby prospect in the same area called Brock. All the data gleaned from those seismic operations and drilling will be taken into account when devising a final solution, and StatoilHydro is now just beginning the process of investigating the best concept or concepts for the different fields.
StatoilHydro is well-known for its deepwater expertise, and innovations in enhanced oil recovery and carbon capture.

What kind of technologies is the company bringing to the UK market?

StatoilHydro brings all the technologies we have experience in, but the fields in question are in approximately 100m water depths, so there is a choice between fixed or floating production platforms. The resource is heavy oil, so the challenges are related to processing, which will require a lot of energy and produce a lot of water as a byproduct. Being energy effective is one of the main challenges.

There’s a perception that UK companies tend to be more conservative and less innovative than their Norwegian counterparts; how will you go about doing this?

It’s still early days and we’re only doing studies, but thus far StatoilHydro has not felt many difficult discussions in partnerships. The company has partnerships with longstanding alliances like Shell in Bressay and Eni, OMV, and Nautical in Mariner. So far we have been pretty well aligned and agreed on the way forward, although next year will be more challenging because the technology and concept selection will be coming into effect.

A week ago you spoke at INTSOK’s “Mission to Aberdeen” about the heavy oil development. With many majors and service providers already present in the area, are there plans to follow suit with operations in Aberdeen?

Of course we have to go through processes and complete final decisions in the matter, but the most likely scenario will see StatoilHydro with an office in Aberdeen, but not until reaching the point of sanctioning the project. But from that point in time we will most likely have an office in Aberdeen, and it’s the most likely place to operate such fields from 2010 and onwards.

From now until 2010, what are your biggest priorities?

At the moment, the biggest priorities are around finding cost-effective, value-adding concepts. It’s important to remember the heavy oil fields in question were discovered in the late 1970s and early 1980s. They’ve been around for a long time, but haven’t been developed for two reasons. The first is that they’ve been economically marginal, and the second that they are also technically and developmentally challenging. StatoilHydro needs to find cost-effective solutions – and cost has been a problem in the last three to four years.

Cost inflation is an issue, but on the other side of the equation and looking at revenues, what’s your evaluation of heavy oil’s attractiveness with oil prices in recent decline?

StatoilHydro intends to have these fields come on production from 2014 and onwards, so that depends what you believe about the oil prices at that time, which is as an important issue as it is difficult to predict.

The core of the team in London is in asset management, and there is a technical project group in Oslo at this stage, so we are in a sense utilizing our people already in the company in Norway to work the technical solutions. Gradually, and I believe this is something they’re really going to sanction within a relatively short time frame, we must build our organization here. StatoilHydro has some technical workers in the organization, but needs to add to them more operational-type capabilities. Many people in the London office have been involved exploration and to some extent business development, but the company needs to round out its competencies, and to this end has already started to recruit and will continue to do so.

What does StatoilHydro represent in the UK market in terms of a brand that will attract this type of people?

If you go to the public, they would know we are a big gas exporter to the UK, but they wouldn’t know much more. Within the oil industry, it’s a different situation, with majors and the people in the offshore industry knowing the company from Norway and the UK. I think we represent an interesting company to work for, and StatoilHydro recruited last year, and is attracting experienced people from other major oil companies. And if we have large project developments coming up that intend to go forward for the next 30 to 40 years while others are in decline, which should be an interesting prospect for a lot of people as well.

You’ve been in the oil and gas industry 35 years now. In your opinion is this its most interesting era?

I think it has always been interesting. I’ve not had a dull moment in my whole career. In Norway, I was part of the first operatorship’s management team within the project development team, which was personally an extremely interesting moment, even if I had previously been part of a Mobil and Shell development earlier on. In a sense, there was this same pioneering feeling in coming to the UK for the first operatorship here and building an organization, finding how to operate it, and so on. Some of the same challenges for StatoiHydro are occurring even in a place where activity has been occurring for 40 years; for us it’s sort of a first time.

How do you want to shape the company going forward around this new development, in terms of management stile and corporate culture?

We of course always build on the StatoilHydro values. I have been in the company for over 30 years and have this ethos at the core. Looking forward to building two new large projects, it’s about getting the whole organization seeing the challenges and ambitions put forward, and view them as something both interesting and fun to achieve, because if you have that motivation in the organization, then you can do a lot. For me, the UK and Norway aren’t very different. While there are different regulations and environments to a degree, StatoilHydro will build a lot of what we regard as best practice from Norway in choosing technology, developing projects, building the organization, and I don’t anticipate this to be a problem in the UK.
StatoilHydro has a very open management stile, a very flat organization, where it’s easy to talk up, compared to sideways in other companies. Around the world in many countries, StatoilHydro encounters people who are pleasantly surprised to see the openness throughout. In a way, the company works very integrated, firstly in our own company between different areas like subsurface, facilities, commercial, and so on. Secondly, if you ask some of the major contractors, I think they would say that we’re good at working in an integrated manner with them, and when we form a project team, even if we are the client and they the contractors, we retain this integrated approach.

What kind of partners will you be looking for going forward?

To some degree StatoilHydro’s partnerships are already established, with Shell for Bressay, with whom we have worked with in many places including Norway, and on Mariner we have three partners: Eni we know quite well from Norway; OMV from other partnerships in the UK; and the new one is Nautical, which is a smaller company specialized in heavy oil.
Heavy oil is one of the legs of the StatoilHydro strategy, with the resource being exploited in several locations worldwide. The company has a process in improving technology and improving efforts required for technology; we regard ourselves as a technology company so to speak, and the ability to use and implement technology as one of our strengths. Another strength is in managing large projects, in which we have a lot of training in Norway, because the projects there, at least in the earlier days, were relatively large on a world scale.
The oil in place for Mariner and Bressay are the largest accumulations in the North Sea found but not developed, even if heavy oil recovery rates aren’t as high as lighter oil. This is the next item to investigate: improving recovery rates over time, and be certain we have not only 10%, 15%, or 20% out of the ground, but more. Maximizing recovery rates is an area the company has worked a lot on in improving, with the hopes of this becoming a company-wide strength as well.

Where do you want to bring StatoilHydro in the UK over the next five to 10 years?

StatoilHydro has been in the UK for over 25 years, having originally opened an office in 1981, with business starting from 1983. Over this time the company did have some operatorships, drilling unsuccessful wells in the 1990s, and since that time has acted as a non-operating partner. In the 1990s, StatoilHydro had 40,000 bpd production, and now we are down to 10,000. We want to bring that closer to 100,000 over time, and Mariner and Bressay will certainly play a big role, alongside other interests such as the 30% partnership in Rosebank with Chevron, and other fields in different stages of development. This trend of 40,000 down to 10,000 and reversing it to come closer to 100,000 is the core aim for the period of time reaching 2015-2020.

What is your final message to OGFJ readers about reaching this ambitious goal in the UKCS?

Of course we will do it. It may take more time and effort than currently believed, but these are our ambitions and StatoilHydro fully intends to realize

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