with Lars Nydahl Jørgensen, Vice President, Maersk Oil
The company has unfolded a highly ambitious agenda for the coming years that targets production of 400,000 boepd by 2020, up from the current 257,000 boepd. Could you outline the exploration strategy that accompanies Maersk Oil’s highly ambitious agenda?
Maersk Oil is in the fortunate situation to have two very solid portfolios. Firstly, we have a strong project portfolio, with a presence in such world class fields as Chissonga in Angola and Johan Sverdrup in Norway. This allows Maersk Oil CEO Jakob Thomasen to publicly state that the company has a reasonable degree of confidence that it can reach 400.000 boepd by 2020.
On top of that, Maersk Oil has a high-profile exploration portfolio which contains all the oil that we have not found yet but with very promising prospects, so even when our current portfolio will start declining, we can continue feeding the beast.
With both a solid project portfolio to bring us to 400.000 boepd and an exploration portfolio to remain there, the future looks good for Maersk Oil.
Naturally, your peers set themselves high targets as well. What sets you apart from the competition?
Whatever we do, we are value driven. What matters is the value assessment at any point in time, and we always make sure that we spend our dollars where there is most bang for the buck.
The growth strategy to get to 400,000 boepd and to stay at 400,000 boepd has three powerful elements to it. The first element is the assets that we already have worldwide, which are sizable. We will continue to increase the value and production levels of these assets by a combination of investments.
These investments could be anything from drilling extra wells, to installing a new platform and implementing optimization techniques. The second element is to further work on our development projects, and thirdly, we will of course continue to explore.
Looking at this third element, Maersk Oil has come a long way. Five years ago our exploratory campaign was not performing as strongly. Since then company made some fundamental changes.
We specifically set out to do two things differently. Firstly we realized that we should only be in the most prolific basins in the world. This also meant that we had to withdraw from a number of places; we are no longer in Columbia, Suriname, Morocco, Turkmenistan, or Oman. I am not saying that these places would not be good street addresses, but we had to make some tough decisions within the rationalization that we were implementing.
The other thing we did is to realize real competition for money internally for exploration projects. This way we could ensure that we were able to rank all the prospects that we have, take the best and drill those, and be ruthless about it. In order to do that, we have to evaluate things in the same manner everywhere in the world, even though we have explorers sitting in different offices around that world. We need to ensure that processes are the same and that they are adhered to.
In the end the exploration managers come up with an assessment of the prospects of which economic value is the most important parameter. We use that to rank the prospects and then select from the top down.
Our exploration managers from all our locations come together four times per year to decide the ranking. They are measured not only on their country’s performance, but also on the global performance of our exploration so it is in their interest to make sure that we pick the best as a company.
If we take a look at the finding cost – the single most important parameter that we measure ourselves against – has dropped massively since we implemented this strategy five years back.
If we compare our finding cost to that of the competition in our peer group of mid-cap companies that have a portfolio more or less comparable with ours, we are in the middle. Comparing ourselves to five years back, it is fair to say that we can call ourselves an exploration company again. That is why I am generally confident that we can continue backfilling beyond 2020.
What is your perspective on the remaining potential of Denmark as an oil & gas producer?
Every now and again you hear quotes in the media that the end is near, and it is clear that the Danish Continental Shelf is a mature area where exploration has been going on for many years.
Having said that, I would like to point out Johan Sverdrup in Norway. Forty years and four generations of exploration had been going on with companies coming in and trying their best, and still Johan Sverdrup was not found.
The importance of ideas should not be disregarded; Johan Sverdrup was found with a new idea in an old area. New ideas in old places are as good as new ideas in new places. Oil is found in the minds of men and women; it is found in thoughts and ideas. This means that having the right talent is absolutely crucial.
You should never say never. Just yesterday I had the opportunity to look at new seismic data of Denmark, and in some of that a picture emerges that is different from what we thought in the past. This happens all the time in this industry. New data can make you suddenly understand why a certain well came up dry. This is obviously what explorers thrive on.
Maybe there are still opportunities out there and I for one can say that Maersk Oil will keep exploring. We have a few ideas and there are certainly a number of prospects that we will drill in the near future.
You are the Chairman of the Committee behind Denmark’s application of the World Petroleum Council (WPC) in 2017. Why should Denmark be awarded to host the congress?
Several countries applied and the decision will be made in October 2013. Denmark is an oil & gas country and has been one for 50 years. The first oil discovery in the entire North Sea happened in Denmark, in 1966. We are one of the North Sea countries and part of the North Western European petroleum industry with close ties to several countries. Copenhagen is a good place from which to view what is going on in North Western Europe, including the entire North Sea.
But that is not all. Thanks to Denmark’s close ties with the Faroe Islands and Greenland, with whom we share 300 years of close history, this is also an excellent place from which to view and study the North Atlantic and the Arctic. These things put together make for a very good case as to why the WPC should take place here.
On top of that comes of course the fact that Copenhagen is one of Europe’s top congress cities with facilities that could easily stage an event like that.
To begin wrapping up, what will be the key factors in coming years to ensure the success of Maersk Oil?
The basins in which Maersk Oil is active are all either in the top twenty of the best basins on the globe or in basins that are most likely to make it into that top twenty. So we like the street addresses that we have, and in the coming few years we will have activity in all these areas.
There are some basins, such as the Baffin Bay offshore West Greenland, where the amount of activity is limited. The remoteness of the license is significant and a huge discovery is needed in order for it to be commercially viable for us. But we will certainly be very busy in Angola, throughout the North Sea, and in Kurdistan. We will also be drilling in the US, Brazil, and Kazakhstan. With 15 to 20 wells per year we can also afford to be active in quite a number of places.
Overall three elements are crucial to secure the future success of Maersk Oil; our locations, ensuring real competition for money within the company, and thirdly guaranteeing the best talent for the company. Recruiting the best people is critically important to us, and we have been successful in doing that – Maersk Oil is actually very successful in recruiting highly qualified at each our locations.
Given the current status around these three points, I am quite optimistic that we will reach the 400,000 boepd by 2020 and that we will be successful beyond that.