Major efficiency improvements have been achieved in recent years to increase competitiveness on the Norwegian Shelf. “We are seeing an industry with a completely different cost awareness than just a few years ago,” says Petoro’s President and CEO Grethe Moen. “This, along with a substantially higher oil price, means that Petoro can deliver a cash flow that is NOK 4.7 billion higher compared with the first quarter of last year.” However, Moen also emphasises that the job is far from done. “It is essential that competitiveness is strengthened even further, and HSE results must improve.”
The serious incident frequency is still high and we need targeted efforts from all players to reverse this trend. The very serious incident at Samsung’s shipyard in South Korea on 1 May also affects Petoro as a partner in Martin Linge. It is crucial that we are able to maintain a high level of safety in all activities related to our operations.
The oil and gas industry is capital intensive, with global competition for capital. In order to maintain the competitiveness of the Norwegian Shelf, I want to highlight four decisive factors; cost efficiency, confidence in the reserve basis, a functioning and sustainable supplier industry, as well as access to new projects.
“The positive cost efficiency trend is continuing,” according to Moen. “However, we are seeing that the effect of completed measures is starting to level off, and that new instruments will be needed.” Petoro believes that digitisation will be key for further efficiency improvements, and expects that this will quickly become apparent in concrete measures for both operational fields and new projects. This will require active involvement from senior management, as digitisation challenges how we work both internally in the companies and in the interaction between operators and suppliers.
For new field developments and further development of mature fields, such as Snorre, the investment decisions depend on a reliable reserve basis. Cutting-edge software has been developed in recent years which describes reservoirs and reservoir development far better than before. This reduces the uncertainty as regards revenues and thereby enhances the quality of the decision basis.
Furthermore, the Norwegian Shelf’s competitiveness depends on a well-functioning and sustainable supplier chain. After some tough years in the industry, we are once again seeing signs that more oil companies are adopting a big picture mentality and a more comprehensive approach as regards suppliers. This entails incorporating both volume and continuity in the assignments. It is very encouraging to see that alliances and new business models are forming, with greater focus on paying for results, rather than work efforts.
And finally, new discoveries are essential in maintaining competitiveness. It is therefore gratifying to note that we are heading for a new exploration record in the Barents Sea this year, with 15 planned exploration and appraisal wells, and with Petoro as a key player. The Norwegian Petroleum Directorate recently doubled the resource estimate for oil and gas in the Barents Sea. The new estimates could mean that as much as 65% of the undiscovered resources on the Norwegian Shelf are located here.
Increased prices and good production development resulted in higher cash flow
Cash flow improved significantly compared with last year due to the higher price and increased production. The realised oil price was NOK 452 per barrel in the 1st quarter of this year, compared with NOK 287 per barrel during the same period in 2016. Net cash flow transferred to the government was NOK 27 billion, a 21 per cent increase. Total production during the first quarter was about 3 per cent higher than during the same period last year. High production efficiency and drilling of new wells counteract the natural production decline on the mature oil fields. Investments so far this year amounted to NOK 6.6 billion, 5 per cent higher than during the same period in 2016.
Head of Communications Christian Buch Hansen
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