Today we’re talking to Knut Rostad, the Head of International Upstream Activities at the Norwegian giant Statoil. In its 43-year-long existence, Statoil has grown from a state-owned upstream company with interests localised in the Norwegian continental shelf, to the eleventh-largest oil and gas company in the world, with operations in thirty-six countries. The company’s upstream operations comprise both conventional and unconventional resources, with the latter located in the U.S. and Algeria.
Statoil’s North American properties include approximately 665,000 net acres in the Marcellus Shale, approximately 73,000 net acres in the Eagle Ford formation (in a 50/50 joint venture with Talisman Energy), and approximately 330,000 net acres in the Williston Basin.
Outside North America, Statoil is an operator in the Timissit Permit Licence in the Illizi-Ghadames Basin onshore Algeria. The shale licence is located in southeastern Algeria and covers an area of 2730 square kilometres. Statoil holds a 30 per cent stake in the licence with the remaining equity held by Shell (19 per cent) and the Algerian government-owned company Sonatrach, with 51 per cent.
Known for its innovation, Statoil has reacted to the low crude price environment by stepping up efficiencies in exploration and production – experimenting with varying depths of wells, different grades of sand for hydraulic fracturing operations, using new fibre-optic sensors, and remotely-operated well-chokes to quickly adjust flows to maximize production without overtaxing pipelines.
Talking to Mr Rostad, Monica Thomas discusses Statoil’s shale operations in the context of the current low crude oil prices, and the company’s stance on natural gas flaring.
Monica Thomas (Shale Gas International): Hello and thank you for agreeing to this interview. To start off: Statoil is a company which started out in the Norwegian continental shelf, quickly becoming the world’s largest offshore company, it also has many conventional assets abroad. Why did it decide to enter the unconventional exploration in the U.S. and where do unconventionals sit in the company’s overall growth strategy?
Knut Rostad (Statoil): Unconventional plays in the U.S. are a substantial resource base and an increasingly important part of future energy supplies. Shale resources have begun to transform the global energy outlook.
For Statoil, shale and tight rock reservoirs are a key growth area that increases our long term reserve base. We have systematically developed its industrial capabilities after our early entry into the Marcellus and Eagle Ford shale gas plays, and with an operatorship also in the Bakken tight oil play, Statoil today holds assets in three of the world’s most attractive onshore plays.
MT: Statoil moved into U.S. unconventional resources in 2008, when it struck a deal with Chesapeake. At that time the company acquired a third of their Marcellus acreage portfolio, but Statoil has since expanded into other plays.
Can you tell us more about where you currently are when it comes to shale acreage?
KR: Statoil’s shale and tight gas and oil business began in the US through active partnerships in the Marcellus play along the eastern seaboard, the Eagle Ford play in south Texas, and our own operatorship of tight oil activities in North Dakota and Montana in the Bakken play.
MT: Statoil has been one of the industry’s top spenders, heavily investing in its global expansion in exploration and production. What is the company’s position now, that the crude prices are much lower than this time last year? Will you be shedding acreage like some other North American operators, or are you going to take a long position on shale?
KR: We never comment on our strategic assessments related to our future portfolio. Statoil is taking long term view on the US onshore assets. Our earnings are of course affected by lower oil prices, but it is important to remember that over the past 15 years the price has fluctuated between USD 17 and USD 147 per barrel. Already when the oil price was over 100 dollars Statoil launched a programme to reduce costs and improve efficiency throughout the company. Continuous focus on cost, efficiency and optimisation of operations will continue to be prioritised going forward. As examples, in our US onshore assets we have managed to reduce drilling cost by 25 per cent to per cent and reduced drilling time by 30-50 per cent.
Statoil has been one of the most successful explorers in recent years, with high impact discoveries offshore Newfoundland and Tanzania and on the Norwegian Continental Shelf to mention a few.
MT: One of the reactions of the industry to low hydrocarbon prices was to develop efficiencies and promote innovation. Statoil is at the forefront of technological innovation, so I would like to talk a little about that. Statoil has been known to take a strong stance on flaring. Can you tell us a little about that – why is it a problem and what is the company doing to reduce it?
KR: Meeting the target of zero routine flaring by 2030 is a highly important contribution our industry can make towards mitigating climate change. In April Statoil and several other oil companies and nations joined together to commit, for the first time, to end the practice of routine gas flaring at oil production sites by 2030.
The collaboration will focus on developing new approaches to create efficient, low-cost technologies for oil and shale gas production while simultaneously reducing emissions, including to reduce flaring and lower CO2 intensity through innovative application of CNG In A Box ™ as part of the innovative Last Mile Fueling solution.
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