TROMSØ, NORWAY—Development of Arctic oil and gas resources requires an approach similar to preparing for a marathon, according to Tim Dodson, Statoil’s executive vice president of exploration. An avid runner himself, he shared his insights on the future of the Arctic with the 1,400 attendees at the 2015 Arctic Frontiers: Climate and Energy conference currently underway in the town known as the “Gateway to the Arctic.”
“Finding, developing and producing oil and gas is never a sprint, and in the Arctic, it’s more akin to a marathon, for which you have to prepare well and for a long time,” said Dodson. “A marathon requires lots of training, discipline—you can’t start too fast—perseverance and will power. I’m convinced that if we take a similar approach to the Arctic, that we can complete many marathons there, too. And, more importantly, not cause any suffering if we plan and train well.”
The experiences gained in Statoil’s 40-plus years of many marathon-like operations in the North and Norwegian seas formed the company’s approach as it moved north and into the Arctic, according to Dodson.
“The combination of what we learned from the harsh environments of Norway and elsewhere are sort of the foundation of what we do, telling us what we might be able to do in the future,” he said. “Ours is a step-wise approach to the Arctic. That also means that you shouldn’t move faster than technology allows.”
Citing the company’s technology “leaps,” like large concrete structures in the North Sea to its subsea developments in the north able to transport oil and gas over vast distances in multiphase flow pipelines and more, will assist in developing Arctic resources.
As part of that step-wise approach, the company divides the Arctic environment into three categories: workable, stretch and extreme.
“By dividing the Arctic into three categories, it helps us to explain the diversity of the Arctic and also support us in risk identification and management,” he said.
The extreme Arctic areas have near continuous, heavy ice coverage, while stretch areas have significant ice or very cold and remote areas that are ice-bound for much of the year. The workable Arctic includes areas with little or no sea ice and limited icebergs.
“The natural place to start exploring for oil and gas in the Arctic is in the workable Arctic, and we're very fortunate in Norway that the Norwegian Sea and the southern part of the Barents Sea are ice-free all year round,” he said. “The oil and gas industry has, in the last few decades, become the driving force in northern Norway, but collaboration and coexistence are key in managing the very rich resources we find here, and not just the oil and gas resources, by any means. We fully acknowledge that.”
Dodson noted that exploration is a key engine for growth for the company and that exploration in northern Norway is part of that.
“Last year, we completed our largest ever exploration program in the Barents Sea. By that, I mean our exploration drilling program,” he said. “There were some disappointments, but we added volumes to our reserves, and we're now evaluating all the data collected, to plan for the future. We are still pursuing the Barents Sea, and to create value from the region, we need access to new acreage.”
The southeast Barents Sea is of particular interest to the company as it is the first area on the Norwegian Continental Shelf since 1994, Dodson said, adding that the company is eagerly awaiting the announcement of which blocks will be included in the 23rd Norwegian Licensing Round.
“Predictable and stable access to new, quality acreage is important for continued activity and value creation, and last year, 33 oil and gas companies got together to gather seismic from this area. From what we're seeing so far, the areas to the north seem to be the most promising,” he said. “Let me leave you with no doubt, the industry has the knowledge and the experience needed to take the next step in the Barents southeast.”
However, there is more to the process than just finding the resources. Income and value generation do not start until production of oil and gas begins, he noted.
“In Statoil, we prioritize projects based on value. In the Arctic, that can be translated into significant volumes, or big discoveries. Nothing else will work,” he said. “Our Arctic assets are part of the global portfolio. They have to compete on equal footing with other global projects, and only the best prospects will be drilled and only the best projects will be developed.”
In light of recent news that the company exited its West Greenland projects, Dodson stated that the decision to exit was based on the lack of value potential when compared to other assets.
“I’ve already gotten the question, several times today, ‘was [the decision to exit] about the $50 oil price?’ No, it's not about the $50 oil price,” he said. “We don’t make our exploration positions based on short-term oil prices. This is about not seeing sufficient potential to move forward, to drill wells and to eventually make discoveries and commercial developments.”
For Statoil, it is the large resource potential that serves as the driver for its position in the Arctic.
“The Arctic is, in our minds, in addition to the Middle East, and Russia, one of very few remaining areas with potential to make huge discoveries,” he said. “But I hasten to add, with a much greater degree of uncertainty than in Russia and the Middle East, because it is far less mature. In the Arctic, we have to make world-class discoveries in order to create value.”
To succeed in the Arctic, Dodson noted that collaboration is key to unlocking the potential, managing the risks and creating good value propositions, not just for Statoil but for all stakeholders involved.
Contact the author, Jennifer Presley, at email@example.com.
Jay Graham is back after the successful sale of WildHorse Resource Development to Chesapeake Energy with a new venture—this time in the Permian Basin.
The Alta Mesa transaction represents the sixth acquisition by partnerships between Tom Ward-led Mach Resources and private equity firm Bayou City Energy Management.
Pioneer confirmed today the sale of its remaining Eagle Ford Shale assets to a Warburg Pincus-backed company, finalizing its status as a Permian Basin pure-play company.