A first-quarter income of NOK 34.2 billion after financial items for the State’s Direct Financial Interest (SDFI) in the Norwegian oil sector has been presented by Petoro on its 10th anniversary. This represents a 20 per cent increase from the same period of 2010. Cash flow to the government also rose from NOK 30.1 billion to NOK 34.2 billion. As manager for the SDFI, Petoro has transferred more than NOK 1 000 billion to the government over the decade since its foundation on 9 May 2001. “We’ve succeeded in creating great value added over these 10 years,” comments chief executive Kjell Pedersen. “I’m nevertheless sure we’ll be even more important for the Norwegian continental shelf (NCS) over the next decade.”
The improvement in results since 2010 primarily reflects higher oil and gas prices. A barrel of oil cost NOK 606 (USD 106) on average during the first quarter, up by 35 per cent in NOK from the same period of last year. Gas prices also strengthened.
Total oil and gas production for the first quarter averaged 1.23 million barrels of oil equivalent per day (boe/d), compared with 1.28 million for the same period of 2010.
Gas production was on a par with the first quarter of last year. Output of oil and natural gas liquids (NGL) fell by 11 per cent, primarily reflecting a decline in production from mature fields and operational challenges on Gullfaks.
“We’ve had a good start to the year in financial terms, but the high prices conceal operational challenges which call for great attention,” says Mr Pedersen. He is otherwise very pleased with the discovery made on the Skrugard prospect, which has helped to generate renewed optimism in the Barents Sea. Petoro holds 20 per cent of this licence.
At the 10-year milestone, Mr Pedersen takes a look back and comments that it is not easy to grasp how large an amount NOK 1 000 billion actually represents. “You can take out your calculator, of course, and convert this huge sum into nursing homes, tunnels or opera buildings. “But it’s perhaps by comparing progress for purchasing power, jobs and prosperity in relation to countries we like to compare ourselves with that we can see the difference petroleum revenues have made to our community.”
He is happy with the progress Petoro has made since he was issued with a keycard bearing employee number 1 in the late summer of 2001. “We were the new kid on the block, who had to elbow our way in among all the big boys and girls. Some predicted a short life for us. Today, I find that we’re respected as a clear and constructive business partner and investor on the NCS.”
Mr Pedersen says that the company early on saw that much of its expertise and capacity had to be devoted to ensuring efficient operation of and improved recovery from the big mature fields, where the SDFI has big holdings.
“On that basis, we’ve involved ourselves with integrated operation for efficient collaboration between platform and land, and we’ve been the prime mover for big water injection projects. We’ve also looked at other methods for improved recovery and faster drilling, and we’ve contributed to ensuring the sale of large volumes of Norwegian gas.”
Mature fields are now the centrepiece of Petoro’s strategy, and the company is devoting much of its resources to helping find solutions which ensure maximum economic recovery and long producing lives for a number of large fields on the NCS. “If we’re going to put ourselves in the best possible position to achieve that, the licensees – including us – must take key decisions over the next three-four years,” says Mr Pedersen. “That includes major investment projects on mature fields.”
Head of communications, Petoro AS
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