"We have noted a growing number of positive results stemming from innovation and adaptation efforts over the past two years. Parts of the sector are seeing profitability starting to rebound to 2014 levels, even with fifty percent reduction in oil prices. This makes the Norwegian Shelf more attractive and highlights the players' expertise and willingness to adapt," says Petoro's President and CEO Grethe Moen.
The impact is substantial when the Johan Sverdrup licence manages to reduce the investment costs for the first phase of the project by more than 20 per cent. The Johan Castberg licence has achieved savings of nearly 50 per cent compared with the original cost estimate. Well costs on several of our major, mature oil fields have been halved, while drilling progress rates doubled. In Petoro's portfolio, we are seeing continued high regularity and a nearly 10 per cent reduction in operating costs. Our experience shows that cost reductions on new projects are largely due to streamlining and simplification, more than renegotiation of the rates we pay for services. As regards modification and operations, it appears that much of the cost reductions can be attributed to the reduction in activity and prices.
"If we are to increase activity on the Norwegian Shelf, cost levels must be reduced even more. This will require a comprehensive, resource-intensive effort," says Grethe Moen.
While our efforts so far have been focused on reducing costs one step at a time using familiar solutions, interfaces and work processes, the paradox we are facing now requires us to consider the opposite approach.
It is important to emphasise that adaptations must never come at the expense of safety. At the same time, we share a joint commitment to ensure that HSE results continue to improve, and that we maintain our confidence that this can be achieved as part of the necessary adaption work that is underway.
"We must acknowledge that continued adaptation will require further innovation. This innovation will also challenge measures that have yielded results so far," Moen says. The changes will be extensiv , and some of them will take a long time and require substantial resources to implement. The benefit will be profitable projects and a viable supplier industry. She emphasises that innovation is a consequence of setting tough, honest priorities, which in turn requires clear, visible management.
Cash flow impacted by lower prices and deferred gas production
Our cash flow is impacted by lower prices compared with last year, for both oil and gas.
Total production in the first nine months was 4 per cent lower than in the corresponding period last year, largely as a result of deferred gas production. High regularity in liquids production has prevented further production decline. Net cash flow transferred to the Norwegian State was NOK 51 billion, a decline of 30 per cent. The reduction is due to the significantly weaker gas price and reduced oil prices compared with the same period last year. So far this year, investments have totalled NOK 21 billion, which is down 5.5 per cent from the same period in 2015.
Read more about the results in the board of directors´ report for the 3rd quarter of 2016 here.
Head of Communications Christian Buch Hansen
Mobile tel.: +47 926 24 255