FLORENCE, ITALY—At the BHGE Annual meeting in Florence, Hart Energy caught up with Torger Rød, senior vice president of projects for Statoil, to discover how the Norwegian oil major is driving efficiencies into its E&P activities.
What sort of year has 2017 been for Statoil when it comes to E&P?
Rød: We now have 32 projects in execution, and we utilized more than 50 million man-hours last year. I think it’s fair to say that we had very good product development year last year with one exception, safety.
You have spoken before about continuous improvement in your operations. How has this manifested itself?
Rød: With all this activity we have been carrying out with our partners and our contractors it’s important to ask ourselves the questions: are we getting continuously better and do we achieve lasting change? I think that is paramount for our industry—to get continuously better and to ensure that we’re getting lasting change. For me and for Statoil in product development, there are really five ingredients that must be in place to ensure change and improvement—acknowledgment, totality, direction, engagement and collaboration.
Taking the first of these, how is acknowledgement accomplished?
Rød: I carried out a study back in 2013 when the oil price was high and at the time we acknowledged that the cost level was too high and not sustainable. We had to change; we had to improve. What was key there was that we started to focus on what we could impact. I think there are very few, if any, that can impact the oil price. What we can impact is what we’re developing, what we’re building, who we are building it with, who we are interacting with, and I think that is key. So that was number one.
The next parts of your strategy are totality and direction. What do these entails?
Rød: It is extremely important to ensure that we are focusing on totality. Totality is what really creates the value, and for me that is from the stores of energy, the reservoir or the wheel if it’s renewable for wind, to the production efficiency. There are umpteen facilities. That is the key to focus, the value creation in what we are doing along the entire value chain.
Direction is also extremely important. As leaders we must set the direction. Sometimes the direction means setting tough targets such as improvement this year over 2017. There we have set some really tough targets of where we need to get when it comes to our capex, value creation, recovery surge or renewals. For me, it’s also about whether you have an affordable portfolio or a non-affordable portfolio. Then there is the progress coming for the next generation of our property portfolio and if we are going to do something different.
Why do you feel that engagement is so crucial in improvement?
Rød: Engagement creates a snowball to roll to ensure that expectations are exceeded. It is easy for me to set some tough targets, but there’s only one way to achieve them and that is to create engagement. First, I need to create engagement within my own section. I must get my people to work. Then it is to get the industry to respond, to grow together—to together create engagement or better product development. We must remember that the most important thing is resource, the oil. Creating engagement is key and to develop the belief that expectations can be exceeded.
Collaboration within the industry is a huge buzz phrase at meetings and conferences, but how does this transfer to the real world?
Rød: We cannot do this alone; we must do it together. And I think that it is also key to understand that, yes, there will be volatility in oil. But by working together and ensuring a better transparency and balance scale when it comes to demand and supply, we are able to thrive in a competitive industry.
A good example of this would seem to be the Johan Castberg (formerly Skrugard) Field situated 100 km north of the Snøhvit Field in the Barents Sea. To achieve profitability in the project after oil prices fell in 2014-2015, you had to change the design concept and develop new solutions to carry out the development. How does this fit the strategy?
Rød: We have been able to get most contractors onboard to work this portfolio now from a breakeven average of $70 to $27 [per barrel]. More important, because I talked about the totality, we have been able to increase the normal reserves in 2017. We have been able to increase in value despite the significant reduction in oil price.
I think Johan Castberg was an excellent example in that. Originally the project had an investment of $13 billion. When we sanctioned it with our partners just before Christmas last year, we had halved the costs. Again, more importantly, we have been able to increase the value quite significantly for the owners, which is extremely important to create sustainable development. How do you do it? It is simplicity. It is to rethink the concept.
What is the key to success in E&P moving forward?
Rød: It is still continuous improvement. In all talk about the future it is always important to reflect on the past. I think we must be honest. Going back to 2013-14, we didn't have continuous improvements. We had more or less continuous worsening of our KPIs. Don’t forget the past when you’re talking about the future. We must continue to ensure that the change that has been seen in this industry, we can describe it as a lifestyle change, and of a long-term directive, it has to be the way of working going forward.
We must understand one another and know what good performance looks like, then collaboration. It’s close collaboration that has taken the portfolio to where we are today. To be able to deliver it, we are totally dependent on working together with our partners or contractors. I mentioned that they had 50 million man-hours last year; 45 million of those were executed by others outside Statoil.
Then of course it’s about being productive. You must always be competitive in the oil industry, and that is extremely important to remember if oil prices rise.