with Raffaele Buonaguro, General Manager, Edison International Spa
Edison has been on the Norwegian Continental Shelf (NCS) since 2007, what is the scope of operations today?
Edison now has 14 licenses in Norway and we are the operator for three of these. Our portfolio is spread throughout the NCS with licenses in the North Sea, Norwegian Sea and even Barents Sea with one operatorship in each of these provinces. Our focus has been on exploration and the plan is to grow organically, through participation in the licensing rounds and APA rounds.
Looking forward, recent changes in ownership mean that Edison is moving into a position where we expect to significantly enhance our presence in Norway’s upstream sector. Edison was recently acquired by the French energy company, EDF. EDF is showing a strong interest in the upstream sector and in Edison as a company. With this support we are looking to transform our presence in Norway in the coming years.
At the moment Edison is just managing the seismic activities as an operator; we are not yet involved in drilling. Our decision on whether we move into drilling will be made in early 2014, so we have some time to develop the organization into one which can handle this responsibility. However, I expect that we will only move towards drilling activity on some of our blocks.
What has been the attraction to Norway for both EDF and Edison?
Norway plays a key role within Edison’s global portfolio, in part thanks to the stability of this market. Norway creates a relatively low-risk position for the company, as it moves into higher-risk regions elsewhere. If you add to that fiscal incentive a stable oil and gas legislative regime then it is clear that Norway is a derisked market in a high-risk industry.
However it is not just about the risk profile, Norway is also viewed by Edison as an area with a lot of hydrocarbon potential and this has been demonstrated repeatedly by the major discoveries made over the last couple of years. In addition, from the perspective of collaboration, one will find all the major and medium-sized oil companies present in this market. It is also where you will have exposure to the most advanced oil and gas technology. There are plenty of reasons to be here.
Given this emphasis on the Norwegian market, how are you targeting your asset acquisition strategy?
Edison has already made three discoveries on the NCS, with two in the same area. The first discovery was made in 2010 and the two others were made in 2012. The focus of our strategy going forward will be on those areas where we have already made these discoveries. One of the main attractions for these areas is that the tie-back to the market is much faster and easier to establish than in other areas, like the Barents Sea. However, Edison does have some activity in the Barents Sea, but we accept that the commerciality of this region is currently limited by the lack of infrastructure.
What is your perspective on how to make Barents Sea discoveries commercial?
The challenge lies in having poor access to the market. However, the oil and gas community is moving towards making a decision on how to generate market access. Edison is a partner in an infrastructure project which is already in its mature phase: the Polarled project. We believe that this will serve as the access point for a future pipeline coming from the North. There are studies by Gassco in their advanced stage which see the pipeline option as the most probable. By 2020 we foresee that gas discoveries made in the Barents Sea will no longer be stranded and will be more commercially viable.
Edison has a joint-venture with North Energy in Norway. What does this bring to your position here?
We see North Energy as a strategic partner; that company has a lot of skill and a good grasp of operations in the North of Norway, particularly in the Barents Sea. This is an area which was a light bulb attracting Edison into this market from the beginning. In 2008, Edison tried to enter the Barents Sea, but did not succeed at that time. The Barents Sea is from an exploration point of view the future for Norwegian production. Our partnership with North Energy allows us to leapfrog into having a substantial weight in this region.
Looking short-term, Edison has the Zidane development project and the Skarfjell exploration well. How will these activities progress in 2013?
For Zidane, we are now looking to enter the FEED phase and at the moment we are holding our breaths hoping that this will be sanctioned. For Skarfjell we are still in the early phase, having drilled our first well recently. However, we have an appraisal campaign which will start in early 2013 and we will wait for these results.
The liberalization of the NCS over the last decade has attracted a great number of E&P players. What is the value that Edison brings to this crowded environment?
Edison is an old company with a long history going back to the late 18th century. We have a lot of experience in Italy from the middle of the 20th century including a lot of exploration drilling activity. Our activity abroad started in the early 1990s in Egypt and we spread to Iran and East Africa. We can bring the knowledge and skills that we have acquired in these markets to Norway. In Milan there is a strong operational centre supporting our global operations, including our activity in Norway.
Given your own previous experience in other international markets, how does the Norwegian operational environment compare?
Probably the main difference that I noticed when beginning to work in this market was the degree of advanced planning and preparation necessary to be successful here. You need to have management systems in place well in advance of your activities and improving our management processes has been the main focus for the company over the last two years.
There are other aspects which are particular to this market such as the opex costs and in particular the cost of drilling. We have also seen that it is not so easy for a company of Edison’s size to gain access to the rig market. The other key issue in growing the organization is the real shortage of skilled labor.
Looking at your ambition to launch exploration drilling, how does the organization have to adapt?
Safety is a major priority in heading towards this drilling operatorship and we are upgrading our management systems to implement these higher standards. The drilling operational department will require staff and up till now we have no people in the operational phase, just a drilling consultant.
The main challenge ahead is to bring people on board the company. Edison has a very attractive portfolio from an explorationist perspective, give the spread of our licenses. The licenses where we are already an operator are not far from the big fields in the southern part of the North Sea and we believe that the Zidane area will create exploration interest in the area. Of course, the Barents Sea where we have two licenses are interesting and we have heavily participated in the latest licensing round, which concentrated on the Barents Sea. The activity and potential we have in Norway is more than enough to keep an explorationist entertained.
What would be your central ambition for the next 5 years?
I would like to grow Norway in a different way to how we have grown so far. I see that to really develop our position, it is necessary to make a production acquisition in Norway. This is the target that we have set for ourselves. This production base would allow us to become a committed player in Norway.
What would be your final message?
Edison is a valuable partner and seeks to be part of the Norwegian system. Our target is to grow extensively and this will come through a near-term acquisition. We are ready to be increasingly present in Norway as a stable and committed E&P company. We take an active role in all of our licenses and see ourselves as a good partner.