Oil industry’s future depends on sustainable change in efficiency

Press release, 2nd quarter of 2016
Change is continuing on the Norwegian continental shelf (NCS). Part of this transformation includes a drive to enhance efficiency. Where drilling is concerned, that has yielded visible results, but the positive trend from 2015 is now levelling out.
Further improvements are necessary, and Petoro would again emphasise that the industry requires lasting structural transformation.
“We have a fundamental problem with the level of costs on the NCS, particularly in the mature phase which we’re now in,” says Grethe Moen, CEO of Petoro.
  
“If we fail to make the efficiency improvements required, we must cease production from existing fields earlier than necessary, and we will be unable to achieve profitability in new projects. That would reduce future revenues for society.
  
“It remains uncertain that the action being taken will lead to lasting change. We must adopt a new mindset, which makes big demands of leadership.”
  
Experience from the UK continental shelf, which faces even bigger challenges than Norway, show that only about 10-15 per cent of the changes made over the past two years reflects improvements in efficiency that are sustainable. The rest represent postponements and cuts in activities along with lower rates in contracts. This could also be the case on the NCS.
  
“Mere cancellations or postponements don’t contribute to lasting efficiency gains,” observes Moen. “Further restructuring must be pursued through innovative forms of collaboration as well as the adoption of new solutions and new technology.
  
“Only lasting structural reductions in costs will make the industry competitive in the long term. Norway’s oil age is far from over. At the other end of this transformation, we’ll find a competitive and sustainable industry which will make a substantial contribution to Norwegian society for decades to come.”
  
The general improvement in health, safety and environmental (HSE) results has ceased. Although results in this area remain at a high and stable level, the industry has a collective responsibility to ensure a constant improvement.
  
The industry has recently received important reminders of how crucial it is to maintain the high level of safety on the NCS. Changes must never be made at the expense of safety.
Production high, but cash flow still down
Total production from the State’s Direct Financial Interest (SDFI) in the first half of 2016 was 3.5 per cent higher than in the same period of last year.
  
Net cash flow transferred to the government amounted to NOK 38.7 billion, down by 29 per cent. This decline reflects a substantial fall in gas prices and a continued reduction in oil prices compared with the first half of 2015.
  
Investment during the first half of this year amounted to NOK 14.6 billion, down three per cent from the same period of 2015.
 
Read more about the results in the Board of Directors’ report for the second quarter of 2016 here.
 
Press contact
Christian Buch Hansen, Head of Communications, Petoro AS
presse@petoro.no
Mobile: +47 926 24 255

Photo: Harald Pettersen, Statoil
 

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