Stavanger – Day Two
Statoil
Head of International Affairs
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Short introduction to Statoil and oil and gas business overview
20,000 employees in 34 countries
Political decision to headquarter Statoil and other oil companies in Stavanger, oil capital of
Norway (spread concentration of activities between cities in Norway)
Running of Norwegian continental shelf, some of international projects, from Stavanger; rest of international/Arctic increasingly based out of Oslo
68% of shares owned by state (can buy or sell like any other shareholder); but Statoil is a private company – traded on NYSE – enjoy some political benefit from relationship
Most crude produced is sold – small volumes go to refineries but not big part of portfolio
Second largest exporter of gas to Europe; first is Russia – feeling that most people would prefer
Norwegian gas
Almost don’t use any gas internally, since all electricity produced by hydro
Largest operator in waters deeper than 100 meters
Goal to be world leader in CO
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capture and storage (including Snohvit, which some in the group will visit)
Ambitions for international growth, including in Russia, which is challenging (who to talk to and when, but major investment expected)
Safety – change mindset when operating offshore
Strategy – Safe and efficient operations; Maximize the potential
In Norway – 34 offshore installations; 18 mobile rigs; and then vehicles (vessels, helicopters, chartered planes)
People working offshore – two weeks on four weeks off (47% higher salary for offshore workers) – single rooms, like hotel (at one point largest “hotel” in Norway – most rooms, employees)
Norwegian Continental Shelf - started with Ekofisk in 1979

Original expected recovery of 46% oil taken from field, continuously trying to increase – now at
75%
Offshore production – delivery of oil/gas straight to markets through pipelines (gas)/tankers (oil)
Seabed pipelines – approximately 1 meter diameter
Snohvit – taken off by tanker; meant for US market – which no longer exists due to shale gas
For oil and gas business – short-term is 10-15 years; long-term is 20-30 years
For each project, Statoil solicits inquiries and builds partnerships with other companies (Shell,
BP, ConocoPhillips, etc.)
*Don’t pay anything for license; rather, commit to drilling wells in certain amount of time – don’t pay (taxes) until producing
Board of Directors (Norwegian except for one; selected more or less by government) sets strategy – not directed by government – strict lines in decision-making
Use gas to increase recovery – but then sell that when done – plus water-flooding (90% water/10% oil)
Have to design platform to be able to use carbon – not done currently
Reservoir management key to high recovery
Gas and oil taxed at same rate (75%)
Statoil works with other tax regimes around the world – all kinds of different processes – production agreements, leases/signing bonus
Snohvit is world’s northernmost LNG operation (which is sent to Japan); no platform, 300 meter depth
Oil – because of different qualities produced – is taken to underground storage areas where different oil can then be drawn out for the right oil quality asked for by market
Research into gas hydrates but no production yet – unstable and uncertainty
Pipelines owned by producers (Gassco) but owners are beginning to sell off to others, including
US pension companies (see Day One notes re: 7% long term, stable return)
Competencies – Harsh environments, Deep water, Heavy oil (most easy oil owned by stateowned companies in other countries – no access), Gas value chains

234,000 people work in the oil and gas sector in Norway (5,000 in fishing; 50-60,000 in agriculture – but people don’t see oil and gas and think fishing/farming to be very important)
Statoil will go where they have better competence than competitors – competing against very big oil and gas companies – and where there is a market (Europe or East Asia)
Alaska activities – Ella Ede, Stakeholder Engagement Manager, Statoil Alaska
Norway and Alaska at 60 degrees north
Corporate culture – 50% of performance is based on how you did things vs. what you did
Second seismic/geotechnical boring studies launched this week
Gearing up for permitting process, also hiring land manager
Seismic used to make decisions on plan forward; evaluate data
Community meetings held in late October/early November
Permitting process remains challenging – uncertainty and multiplicity of actors
Northern development – Hans Gjennestad, Senior Advisor – Strategy
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Oil and gas in the High North
People don’t understand the magnitude of the acreage of the arctic and northern continental shelf
Statoil has transitioned over 40 years from shallow to deep water; from oil to oil and gas; simple to complex reservoirs; fixed platforms to sub-sea; south to north
7,000 kilometers of pipeline system
Snohvit is complete sub-sea network – 130 kilometer sub-sea pipeline with multi-phase flow – take gas from reservoir to platform, remove CO
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and send to separate reservoir – then gas sent to onshore platform – this is a great example of the technology for arctic development
Two challenges in arctic – ice and distance (two solutions to ice – withstand or avoid – and subsea network avoids ice)
Key realities outside Norway
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Continued and increased European demand
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IEA estimates production decline – will have to come from Russia, Norway or Algeria
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Barents Sea gateway to the Arctic
Increasingly good understanding of arctic sub-sea geography and oil/gas reservoirs

Big projects – Shtokman – not cost effective yet – find ways to address this technically or through Russian tax regime
Initial seismic is done by Norwegian government – broad analysis (2D or regional mapping) – funded by general taxation (budget of 80million NOK)
Oil sub-sea pipelines smaller distance from platform to onshore facility – maybe 50-60 kilometers – vs. gas – which is more like 150-200 km
Experimenting with compressing gas at wellhead – same technology could be used for longer distances
Aiming eventually at sub-sea platforms
Some projects where main play is gas, with small oil column that has to be left/stranded
(depending on approach). New approach to come in horizontally to reach lower oil column.
Companies then do more detailed seismic to determine where to explore
Research and development budget? Enormous amounts of money – unsure of amount. Financed by Statoil
Comparison between Shtokman and Snohvit – challenge is distance to shore, Shtokman more exposed to sea ice but has larger reservoir
Successful development north of Norway – where it’s not exposed to ice – is a small step toward developing in ice
The High North – a natural meeting area for long term cooperation
Development in the arctic will be extremely difficult – there will be delays, there will be disappointment, but with patience and persistence there will be success
With deep water you can have sub-sea development and avoid ice; shallow water more problematic.
Seismic (2010 acquisition offshore Alaska) – Ingolf Soreide, VP, Geophysical Operations
Marine seismic acquisition – pressure wave generated by compressed gas, bounce off bottom and hit hydrophone (10 cables of solid streamer, 6000 meters long, 100 meters apart) where data is collected; time + velocity can figure out depth = mapping of sea floor/reservoir level
Chukchi Sea lease sale in 2008 – first sale since 1991
16 leases, 14 of which were joint bids with ENI; 50 more with Conoco

Seismic vessel (12,000 tons; 5 MMO) + supply vessel (for fuel/crew; 1800 tons; 3 MMO) + monitoring vessel (197 tons; 3 MMO) to conduct seismic acquisition (all with marine mammal observer on board)
12 streamers used, which is more than historic usage in Alaska by other companies (8)
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2600 sq. km surveyed
Key focus should be on risk and environment, as well as stakeholder management
Lack of infrastructure in Alaska was challenging – crew change, response capacity
Operations phase included marine mammal observation, shallow water, limited open water season, harsh environment
Permitting required begun 12 months before operations – good dialogue with authorities
No safety incidents
Environmental analysis
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Survey immediately stopped (halt pressure release) when marine mammals observed
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No oil released
Acquisition resulted in excellent data quality
2011 Site survey program – scope of work – validate sea floor location
How does permitting process compare to Norway? Alaska’s is very “comprehensive.” A lot of work, several instances where Norway’s is much easier (five weeks) to one agency (fisheries department also involved)
Technology depends on water depth – 150 meter perhaps a fixed platform, maybe combined with process unit on board; 300 meter perhaps a floating platform
Environment
Details from Chukchi Sea – baseline study – cooperate (shared program with Conoco and Shell, also share with community) with other companies who are doing this research as well – acoustics monitoring, fisheries ecology, benthic and plankton ecology, mammals, seabirds, physical oceanography
Marine Mammal Observer program (based on visual observation) +
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Use of towed and fixed passive acoustic monitoring (hydrophones or streamers)
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First industrial test of IR camera for detection
IR proved whale and walrus tracking – walrus had avoidance technique (200 counts)

Stopped seismic for three days during walrus migration – “heads popping up like mushrooms”
Rules and regulations are there to be followed – no further discussion
Permitting in Alaska very focused on marine mammals; in Norway its fisheries
How does seismic affect marine life? Complicated, depends on context.
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$35 million research study by International Association Oil and Gas Producers
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People concerned about behavior disturbance – effects on population
Temporary threshold shift (TTS) – UC Santa Cruz study on trained seals that respond to sound
Work with University to some extent, generally work with those who are working on similar issues – there aren’t any boundaries in this regard
Could formalize traditional knowledge incorporation
Corporate/social responsibility
Spend a lot of time listening to concerns/input from community
Norwegian Act that requires Norwegian companies to act a certain way
Values-driven
Norwegian Petroleum Directorate – Johannes Kjode, Deputy Director General
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Describe domain of NPD
Subordinate to Ministry of Petroleum and Energy
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Exercise management authority in areas they were delegated
Mission – create the greatest possible value for society from oil and gas activities by means of prudent resource management
Companies care for themselves; NPD cares for society
Technical experts at NPD vs. policy/political employees at MPE
*NPD - communicate reliable information to build confidence in oil industry among public
Tracks data for resource estimates – forecasting (government wants one answer; NPD accounts for uncertainty/complexity – 10% chance of getting it incorrect)
Ownership of remaining reserves – Statoil and SDFI together approximately 50%; big international 36%

SDFI – State Directed Financial Interest – owned and operated by state, retains 100% of profit –
Petoro – don’t operate anything, just “create value” through investment
Statoil very dominant in currently producing fields; more diverse in future (side conversation noted that Statoil will increasingly not get as many bids)
NPD finds more
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Data gathering and mapping of unopened areas
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Opening of new areas
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Award of exploration licenses (NPD can grant)
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Award of production licenses (rests with MPE, NPD advises)
“Mature for opening” is a political decision; which are open first are technical, where good technical knowledge, high expectancy of success, and infrastructure contribute
Predictable licensing system
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Company covers administration costs (100,000 NOK) of license
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Licensing rounds – mature for opening – annual round (deliver or drop, DPO or drop – if dropped they go into next round) o Companies are not allowed to sit on these without commitment
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Frontier areas – biannual rounds
Process – nomination by companies of which blocks they would like to see in round; NPD incorporates into decision; MPE announces; companies apply, followed by negotiation period –
NPD goes through application and gives ranking (criteria varies based on project) based on technical expertise; negotiation includes commitment, working for state interest (state always interested in getting something back); final award (not often that companies refuse – can’t appeal)
Strict application of deliver or drop though there are sometimes good reasons and an extension given, maybe a year. Some drop and then rebid.
State doesn’t compete on talent, but people move to government for good reasons (back and forth)
How is SDFI level chosen? Recommendation by industry and NPD – if there is high potential in prospect, state should be involved (also risk involved)
More than half of oil left to be developed right now; NPD tracking of what is easy to get out
(water/gas) vs. what might be more dangerous (chemical injection)
NPD works to keep companies from only exporting gas and leaving oil; working with industry to get both out

Data management is important – all data comes to NPD from all sectors, especially industry – receive all by-logs, core data, seismic data – all data goes on their website – companies can also come in and see core samples (2000 NOK covers admin costs)
Increasing CO
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emissions from petroleum industry has meant increased attention to carbon capture and storage – working on larger scale too
Diverse kinds of gas – go to refinery for separation – produce various things with byproducts
Conflict between seismic and fishing – allocated areas that take into account spawning/migration seasons
Mandatory course for fishery experts; system for reporting and tracking seismic operations
Petroleum Safety Authority – Paul Bang – Senior Advisor
Used to be part of NPD – split by political decision in 2003
Gulf of Mexico has had a huge impact on how people are thinking; Norway has wealth of experience
Newest find – complex geology and latest technology (couldn’t see that deep earlier)
130,000 employed in sector; 15,000 km of subsea pipelines
Safety, Health and Environmental impacts
Norway most transparent country in the world – sharing information!
Stakeholder identification/management (associations, workforce, authority)
Adverse interest when making regulations in US – not the case in Norway (also meaning of compliance is different in Norway)
Ekofisk, for example, designed to last 20 years, just reinvested in for third time, which will mean
60 years of production (ConocoPhillips is operator 60 billion NOK investment; TOTAL bigger owner)
Complicated industrial environment – can’t afford to have anything go wrong
Need purpose for regulator (so client understands and believes is important as well – creating alliance between industry and regulator) – Common understanding of approach/cooperative interest
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Develop regulations, produce framework for regulatory environment

Huge technological advances to be incorporated into process; ongoing changes in business (parts of production moves onshore, integrated onshore/offshore with intelligent fields – ICT, video conferencing)
Need preconditions for sound petroleum management – build capacity in the public sector
Need fully competent companies – companies that move to the left (understand Nordic model of welfare; move beyond just business model; never underestimate culture of what you’re doing)
Evaluation of newcomers – prequalification (NPD audits)
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Financial capacity
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Technical competence
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HSE – management system
Safety purpose stated in law – personnel, environment, financial value
Safety gives us increased income – create alliance
Governance – separation of roles and responsibilities
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Ministerial level – national plan, legal basis ,licensing
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Oil companies – field development, contracting, operations, marketing
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Agencies/authority/NPD – detail regulations, guidelines and standards
Who bears the burden of stringent regulations? Move from many different regulators to multipurpose regulations/regulators under one agency. Government bears burden of cost and communication. Stand up to industry as one body.
Delegation of power to professional independent body – separate from political decision – to ensure continuity, effectiveness, powers aren’t overstretched
Clear lines of reporting to ministries; clarified lines of responsibility (historical review – early years in late 70s had over 200 people killed in industry accidents – had to respond with risk based thinking, coordination between agencies, new system/regulation making)
Consent – new companies must apply for formalized PSA approval (note, company like Statoil doesn’t need to do this – experienced operator)
If you want stakeholder involvement, you have to put in place systems for that engagement – monthly meetings, working groups, training, regulation review
To be competent regulator, you need competence – experts in their fields
PSA teams of supervisors/experts manage various groupings of industry (Statoil one group; explorers only in one group; big international one group; etc.)
Teams can conduct on-site audits of rig operations