Press release, SDFI, second quarter of 2011:

Results up 23 per cent – higher prices

Increased oil and gas prices helped to boost first-half income from the State’s Direct Financial Interest (SDFI) in the Norwegian oil sector by NOK 12 billion, from NOK 54 billion in the same period of 2010 to NOK 65 billion. Cash flow to the government up to 30 June totalled no less than NOK 67.9 billion, despite substantial reductions in both oil and gas production compared with the first half of 2010.
Output of oil and natural gas liquids (NGL) fell by 13 per cent in the second quarter and 12 per cent for the first half. That primarily reflected large-scale maintenance activities, operational challenges and declining production from mature fields. Contributions from new fields such as Gjøa and Vega counteracted the overall decline in output.

Gas production during the second quarter was down 26 per cent from the same period of 2010, primarily because a number of fields were shut down for more extensive planned maintenance in the first half than in these six months of last year.

According to Petoro chief executive Kjell Pedersen, the strengthening in oil and gas prices can be partly attributed to a changed balance between supply and demand as well as a greater focus on energy supply in Europe following the Japanese nuclear disaster.

An increasing acceptance of the climate benefits of gas also plays a role, he maintains. In his view, both short- and long-term energy market trends suggest that development of the Norwegian continental shelf (NCS) must continue with undiminished vigour.

In that connection, Mr Pedersen highlights two important decisions taken during the second quarter – including the approval of subsea compression on Åsgard by operator Statoil and the other licensees. Petoro believes that this technology will be highly significant for maximising recovery and value creation from fields with gas production. Similar solutions are also relevant for Gullfaks and Ormen Lange.

The other decision is the long-term strategy adopted by the Troll partners for the use of four rigs to drill oil production wells on this North Sea field. Two new specially built “category D” rigs have been ordered for drilling under an eight-year charter which will begin to run in 2014.

“Both these decisions represent important elements in our strategy for improved oil recovery (IOR) and for maximising value creation on the NCS,” says Mr Pedersen.

He adds that, given the large number of subsea wells in these waters, rig rates are highly significant for IOR.

“Today’s high rates make it more difficult to justify drilling and working over subsea wells which could improve recovery,” he says.

“We should ask ourselves whether it is a law of nature that drilling rigs belong to the licensees on fixed platforms but to rig contractors on mobile units.

“If a licence has a long-term requirement to drill or maintain subsea wells, the partners should consider whether it would be better to own the mobile rig themselves – with a hired contractor to operate it – rather than chartering at market rates which have increased by a factor of three or four over the last six or seven years.”

Contact person:
Sveinung Sletten, head of communications, Petoro AS
Office: +47 51 50 20 24
Mobile: +47 95 07 55 54

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Publishing date: 02-08-2011