Helge Lund, president and chief executive officer of the newly formed StatoilHydro, discussed intelligent operations (IO) and the value of collaboration and partnerships in addressing the technical challenges facing the oil and gas industry.

StatoilHydro is now firmly established as an entity. How would you describe the culture of the new company and your objectives moving forward?

The merger between Statoil and Hydro’s oil and gas activities was a response to the global energy industry challenges. The development we have seen the 17 months since we announced the merger has strengthened our conviction that this was the right move. I am impressed with the organization’s ability to maintain safe and efficient operations and execute a high-quality exploration and business development program while we have been undertaking a large and complex merger and integration process.

The integration process is ongoing and will demand a lot from the organization. As for culture, I see more similarities than differences between the now merged organizations. The differences are in my view a positive source for improvement. Moving forward, we will continue to take the best out of each organization to create a stronger company with a common culture where best practices are nurtured and implemented across the organization.

Does this represent a shift in the way the company will work?

The merger has strengthened the company in a number of ways. We access more technology and competence, we are strengthened financially and organizationally, and we have enhanced our capability of maturing complex projects and pursuing new business opportunities. Through the integration process, we have identified several areas where we believe standardization and uniform work processes will improve HSE performance and operations. We have also communicated to the market that we are committed to capturing substantial synergies.

Has StatoilHydro’s role changed or evolved in the past year?

We presented our strategy for StatoilHydro earlier this year. In essence, our ambition is to capture the full potential from the Norwegian Continental Shelf (NCS) while we are building international positions for continued growth. We aim to deliver long-term growth and continue to develop technologies and manage projects that will contribute to meeting the world’s energy and climate challenges in a sustainable way.

We approach the climate challenge with technology and industrial solutions and aim to develop a stronger position in the field of new energy. We are working on ensuring a cleaner and more efficient core business and are developing our leading position within carbon capture and storage. In parallel, we are working to establish a business within renewable forms of energy focusing on offshore wind and biofuels.

What is StatoilHydro’s role as a National Oil Company (NOC) in today’s world?

It is misleading to characterize StatoilHydro as an NOC in the traditional sense. The company’s role as a political instrument for the Norwegian state was abandoned in the 1990s. We compete for opportunities and assets on par with others on the Norwegian shelf as well as abroad, and as a listed company, we are measured on financial and operational parameters on a quarterly basis.

Our NOC heritage can still be a valuable door opener. Some 80% of the world’s hydrocarbon resources yet to be developed are controlled by governments and national oil and gas companies. Resource holders are increasingly aware of the value of their resources and have become more aware of the ways these resources should benefit the host country. We understand national concerns. The Norwegian model, where we have been one of the key features, is widely recognized as a model for distributing value and competence to society from petroleum activity. I also think we are appreciated for our holistic perspective as a company, where environmental and social responsibility are integral to our thinking.

You have emphasized over the past year or so the importance of partnerships and collaboration. Can you elaborate on your views and explain what sorts of joint efforts StatoilHydro is pursuing?

To me, increasing complexity is the key feature of our industry today. Technically, we are attacking deeper waters, harsher environments, heavier oils, and tougher projects.
Commercially, the race for reserves is getting increasingly fierce, with national oil companies going global and classic utilities and service companies crawling up the value chain. Politically, resource nationalism is an emerging reality. I think increasing complexity will lead to new business models with more collaboration.

Business models will be realigned and rebalanced. To work, they must align interests in ways that create genuine win-win partnerships. The companies that are best at striking the balance may also strike the best deals.

For StatoilHydro, as a technology-driven company, we have over time established strong relationships with suppliers. This has helped us to develop cutting-edge technology and overcome new barriers in our exploration and production portfolio. A close cooperation with the supplier industry is one of the success factors behind our strong technology position within subsea field developments.

You spoke at the Intelligent Energy conference in Amsterdam in February about StatoilHydro’s move toward intelligent operations (IO). Can you discuss how the company is using this technology and the impact IO is having on operations?

StatoilHydro aims at being the international IO leader by networking competences globally. The entire oil and gas industry is moving towards more integrated operations. Time and space are no longer necessary boundaries to optimal operations in the oil and gas industry. We must be competitive within this field in order to be an attractive operator and partner in new areas and licenses.

IO is a response to the increased complexity and global outreach of our industry. By utilizing real-time information in work processes where competencies and technologies are integrated across disciplines and geography, we are able to strengthen HSE, increase production and regularity, prolong tail production of mature fields, and reduce costs. We are in the beginning of this development, and the potential benefits are substantial, both to us as a company and to our host countries.

In what other technologies are you investing?

Technology and expertise developed on the NCS is our main business enabler. We have highlighted four focus areas where StatoilHydro has competitive advantages and experience: deepwater development, gas value chain, harsh offshore environments, and extra-heavy oil.

We are recognized as one of the leading technology companies within subsea field development, long-range multiphase transport, carbon capture and storage, reservoir management, and exploration technology.

In what research or JIP efforts is the company involved?

StatoilHydro develops technology to maintain a position as an innovative provider of energy. Both conventional and new energy supply requires distinctive technologies and considerable capital expenditure. Our R&D activities therefore cover all of our current value chain elements from exploration through refining as well as some potential new energy initiatives and CO2 handling.

Our R&D efforts extend from fundamental research with academia through carefully selected partners to joint industry projects where general industry challenges and public interest issues are addressed. Lately StatoilHydro has also embarked on new technology cooperation concepts with carefully selected and complementary supplier industries, whereby all partners contribute with both capital and intellectual investment.

For these projects StatoilHydro provides testing facilities for pilots and benefits from being first mover. One such example is the Tail IO project. Since 2006 we have worked together with IBM, AkerSolutions, ABB, and SKF to address new technologies for increased oil recovery.

What will be your E&P focus in the coming year?

Our immediate priority is to deliver on the production and synergy guidance we have given to the market. We will focus on improving our operational performance and continue to develop growth opportunities in accordance with our strategies.

We have, in recent years, established material positions in Canada, the US Gulf of Mexico, and Brazil. The task ahead is to develop these positions and turn them into important future production assets. The same goes for Russia, where we are fully committed to working with Gazprom and Total to mature the Shtokman project towards an investment decision. We will also maintain a high exploration activity, both on the NCS and in other countries.

How is the company positioned today to pursue its objectives?

I think we are very well positioned. We have a unique position on the NCS, giving us the opportunity to maximize our value creation on our home turf while we continue building international growth. The merger has given us increased expertise, technology, and capacity to pursue our objectives.

What should we expect to see from StatoilHydro in the next two years?

We will pursue the roadmap for growth that we have outlined in our strategy, maximizing our Norwegian assets and building international growth. On the Norwegian Continental Shelf, our priority is first and foremost to maintain safe and efficient operations, improve regularity, and utilize our infrastructure to its full potential.
At the same time, we will develop new projects and keep up a high exploration activity both in mature basins and frontier plays.

Internationally, we have strong production platforms in West Africa, North Africa, and the Caspian. We will develop new international core areas based on the positions we have established in the US Gulf of Mexico, Canada, and Brazil, and we will continue an active exploration program in a number of countries.

We will continue on the journey that we have presented to our shareholders, the journey of transforming StatoilHydro into a truly global energy player.