Neri Askland – VP Middle East and Country Manager, Statoil, Abu Dhabi
Neri Askland, the VP Middle East for Statoil, explains the strategic positioning of Abu Dhabi for Statoil, how the company can contribute to Abu Dhabi’s ambitious production target, its investment in offshore gas extraction, as well as his perspective on the synergies present in Abu Dhabi’s open business environment.
What is the strategic positioning of Abu Dhabi within Statoil’s overall portfolio?
Since 2010, we have been continuously working with the Abu Dhabi National Oil Company (ADNOC) to identify areas where we can establish win-win opportunities. Five years on, I am pleased to say that we have established a very strong working relationship with collaboration and cooperation in areas like R&D and some level of resource sharing. For instance, we have established a good partnership with the Masdar Institute involving joint wind projects in the UK, this project is a stepping-stone, as well as a model of the sort of mutually win-win relationship we hope to build between Statoil and Abu Dhabi.
We retain our firm belief that Statoil is in an excellent position to deliver value here but we are still in the business development stage at the moment and as such, we have not entered any assets or fields.
You have been with Statoil in some capacity since 1997 and with the Abu Dhabi branch since its inception in 2010. Now that ADNOC has announced a plan to increase production to 3.5 million barrels per day by 2018, what would you identify as the most significant opportunities for Statoil in Abu Dhabi?
Intrinsically, petroleum is a long-term business. A few years is a very short time frame for an oil company in an industry where big projects can take four or five years to simply reach the final investment decision, and by that point, there would already have been several years of significant investment in exploration. A decade is a normal project timeline, so for us, our interest in Abu Dhabi represents a long-term commitment that extends beyond the current capacity target of 3.5 million barrels per day. This capacity increase is evidently the initial target in Abu Dhabi but there are other opportunities and projects.
To deliver on expected production, we believe that it is essential to focus on recovery maximization. There is a need to consider the broader sustainability picture. The inevitable challenge with oil production is with reducing or even avoiding the subsequent decline in production. This has been our experience in Norway, where we have some of the highest recovery rates in the world, as a result of significant government pressure, and this is an even more impressive feat because most of our oil is offshore, which adds significant complications.
But this is precisely where we are confident we can deliver value to Abu Dhabi. To generate the best solutions and then tailor them to each reservoir requires both advanced technology and significant expertise to implement it, and at Statoil we possess this triumvirate of experience, processes, and technology. We are well positioned to serve as partners to Abu Dhabi.
Statoil has set world-leading enhanced oil recovery (EOR) targets with a goal of 65 percent as an average for platform operated fields and 55 percent from subsea operated fields, yet ADNOC has the impressive aspiration of reaching 70 percent EOR in the coming years. What strategies would be required to accomplish this feat?
In Norway, we have steadily managed to increase our EOR from 50 percent to 60 percent and finally to 65 percent, on average across all our fields, which is very impressive. This has been made possible because of our unceasing development of new technology and methods, and this will be an indispensable element of any successful strategy to accomplish what ADNOC wants to do.
However, it is easier to produce oil in the North Sea because of the properties of the sandstone there; the carbonate reservoirs, where the formations are tighter, in Abu Dhabi complicates matters somewhat, as much of the technology is transferable. Recovery of 65 percent is nonetheless possible with available technology if everything proceeds smoothly. The target of 70 percent is hence very ambitious but Statoil like it precisely for its aspiration. It gives us something concrete to work towards for the future. We will get there through our belief and commitment to ADNOC’s target will drive our efforts in R&D.
This applies to Abu Dhabi’s targets for offshore production as well – ADNOC wants offshore reserves to account for 50 percent of oil production by 2018. The same focus of recovery maximization applies as well but the entire landscape here is complicated by a host of associated logistical concerns like the potential for spills and well access, among others — offshore operations are simply more expensive. We are confident that in this area, Statoil’s expertise in offshore production is another way we can further deliver value.
You expressed that “Statoil has a long history of developing robust gas value chains”. Despite having significant gas reserves, Abu Dhabi remains a net gas importer because its reserves are abundant in sour gas. This means that developing a local gas value chain is another priority focus. What opportunities do you see in this sector?
As a company, we fundamentally believe that gas represents one of the quickest solutions to the problem of excessive global carbon emissions. To reduce carbon emissions effectively in the short term, gas is the quickest fix. Abu Dhabi relies significantly on gas to meet residential, industrial and commercial demand, and so the gas question for Abu Dhabi depends heavily on the projected level of demand.
On the supply side, the challenge of sour gas means that the problem of CO2 emissions is unavoidable. As a byproduct, either one finds value for it somewhere or one pays the cost for it. Unless Abu Dhabi can find some value for CO2, for instance, like how the Masdar Institute is working together with ADNOC in the Rumaitha field for enhanced oil recovery, it becomes a cost of developing the sour gas reserves. For instance, in Norway, we have to pay carbon emission taxes. If huge potential value can be found for CO2, then the sour gas reserves become a very interesting resource.
This is more of a financial question than a strategic one, as there are many supply sources of LNG, and Abu Dhabi always has its sour gas reserves as a safety net. We are happy to contribute our expertise and partnership in any capacity.
Abu Dhabi is known for its open attitudes to international business and investment, which is uncharacteristic of the region. As a Norwegian business leader, what more can Abu Dhabi learn from Norway?
Statoil’s openness is unequivocally one of its best assets. Norway has had a learning journey in oil and gas and we are testament to the success of this open-door model. In the 1970s when we first discovered oil, we had to rely heavily on IOCs for their technology and expertise. But our government also devised a plan to ensure we maximize the potential of our oil resources. With the establishment of Statoil, we worked with IOCs as partners with contracts that included the condition that we would take over as operators after a certain number of years. In this way, we struck a balance between gaining the outside expertise and experience we required; and the domestic control necessary for our national plan. With this arrangement set out at the beginning, all we had to do was learn from the IOCs.
That said, we are still in the learning mode because one can never be finish with learning. Now Statoil competes with IOCs but we retain a fundamentally open business model because this is essential for growth and education. We need to interact with other oil companies and learn from their best practices in order to grow as a company ourselves. We also have very close relationships with suppliers and contractors and this is how we capitalize on synergies and build value.
Openness has become the gene of our company and this explains our success; we are very pleased that Abu Dhabi is pursuing a similar policy.
You have worked extensively in very international contexts, from Iran to Venezuela and now Abu Dhabi; how has your experience in Abu Dhabi been, personally and professionally?
I have been first overwhelmed and then impressed by the sheer diversity that exists here. Culture and its variations are always a fascinating study. I think we sometimes tend to focus too much on the differences that exist and how they affect the way cultures interact, and this is what we worried about at the start. For instance, this occurs when introducing someone from a different culture into the company here. After reflection, I now realize that a lot of the worry was unnecessary. We just have to make the active effort to understand everyone. I am particularly impressed with how all the diverse cultures have interacted and adapted to each other in this country; the nationals are a minority but they have managed it very well. Having multiple cultures working together creates many opportunities; everyone brings a different perspective and this is immensely valuable in any environment.