By Darius Snieckus
OGJ Online
LONDON, Feb. 20�Olav Fjell, CEO of Statoil AS, will report that the top-to-bottom restructuring launched by the Norwegian oil and gas giant 3 years ago is on track to be completed by the end of the 2001, when he announces the group's full-year results later this week.
Fjell, speaking at the Institute of Petroleum's IP Week conference, said the company expected to meet the targets that were set as part of its four-prong "strategic response" to profit-damaging overexpansion by the company during the 1990s "on time."
Statoil's 1998 strategy�aimed at "concentrating and consolidating" the company's business�entailed selling down its portfolio of oil and gas assets by 24%, cutting costs by 20% and staffing levels by 10%, "focusing" growth, and "improving management systems."
"As to the restructuring of our assets, by the end of last year we had achieved a 17% reduction in capital employed. That is, we are on track," said Fjell. "Cost reduction was also seen as critical. By the end of 2000, 15% of that 20% had been accomplished."
He said the company had "taken the decisions necessary," to meet its staff reduction target.
"Together with new corporate systems and clear incentive schemes, these measures will enable us to unlock a potential for significant and profitable growth within our core activities," Fjell stated.
"The Norwegian Continental Shelf (NCS) will remain the core industrial area for Statoil for many years to come," he emphasized.
Statoil's longer term goals, he said, included being a "top upstream player and operator" on the NCS and in its international core areas�where some 15% of its reserves lie, a "strong" European gas company, and establishing a high profile brand in the downstream Scandinavian and Baltic energy markets.
"Our strategy has always been to cash in on our competitive strengths in new areas," he added. "Our international progress would have been impossible without a track record in Norway. On the other hand, international presence will probably also be critical for the future attractiveness of our homeground, the NCS."
Enhanced oil recovery, said Fjell, was a "very high priority" for a company that was responsible for some 50% of hydrocarbon production in a province where only in the region of 25 % of total reserves had been exploited to date.
He said Statoil would concentrate both on "exploiting the large potential remaining in existing fields, as well as (on) attractive unexplored acreage in increasing water depths" on the NCS in the future.
Fjell said Statoil plans to build on its position as the "largest European gas supplier" as its supply commitments reach 70 billion cu m/year in "a few years time" by tapping gas fields already on stream to grow its UK market share from its current level of "almost zero."
"Norwegian reserves should be especially competitive in the UK market," he said. "The Vesterled gas transmission system is the first to move gas across the North Sea, but we already see a potential for utilizing more existing infrastructure for transportation of Norwegian gas to the UK."
He said Statoil calculates a market for between 3-7 billion cu m/year of gas in the UK, "depending on the terms offered by the market," in the coming decades.
"As UK gas production flattens out, we expect continued demand growth to open a potential for Norwegian gas also in the UK," said Fjell.
Partial privatization
Meanwhile, Fjell said Statoil would be ready for its much-discussed partial privatization by June.
The Norwegian government plans to float as much as 25% of the state-owned company through an initial public offering while selling a slice of its state direct financial interest (SDFI) in the NCS.
He said the White Paper released by the government last December would serve as a "cornerstone (for the Norwegian oil and gas industry) for years to come," and would, following the initial public offering, result in a "stronger Statoil."
Statoil's equity production, said Fjell, would increase by 30% through the cash and equity transfer of 15% of the government's current SDFI holdings. He added that the acquisition of SDFI interests would also give the company greater "strategic flexibility."
Under the proposal put before Norwegian parliament on Dec. 14 by the Ministry of Petroleum and Energy, between 10% and 25% of Statoil would be floated as early as next summer through an initial public offering, with the government retaining at least two-thirds of the shares in the company. The option to enter into "equity-based strategic alliances" with other companies would be open to Statoil, but only after the IPO.
At the time of the release of the White Paper, Fjell had felt the proposal fell far short of Statoil�s own vision of its future. He had said he was "disappointed" the proposed SDFI redistribution didn�t "live up fully" to recommendations drawn up by Statoil, but acknowledged the government plans would give his company "greater strength and freedom of action" through an IPO.
