Norway's Den norske stats oljeselskap AS sees the U.S. as a major market for its North Sea production.
Statoil Pres. Harald Norvik told the Norwegian-American Chamber of Commerce in New York his company is still working on plans to ship liquefied natural gas to the U.S. Statoil anticipates increased oil and gas exports and is seeking wider trading for its Oseberg field crude.
"We believe the U.S. will be an attractive market, and the 1990s will be an attractive time to enter that market," Norvik said.
He predicted horizontal drilling will completely change the economics of North Sea oil field development by reducing costs and increasing recovery rates.
Statoil is encouraged by its experiments so far with horizontal drilling, although they were "not an extensive success." But Norvik said results in the 1990s will be incredible for the oil business.
Other developments in technology, such as production of satellite fields via subsea wellheads tied to central platforms, offer promise, too.
LNG PROJECT
There has been some slippage in the LNG export project, but Statoil remains committed to the concept (OGJ, Dec. 19, 1988, p. 21).
Norvik said, "We have for some time been working to establish a footing in the largest of all gas markets, the market here in the U.S. An entry into this market would be our first LNG venture and requires careful planning and assessment."
Statoil hopes to build a $600 million plant at Karsto to liquefy 250 MMcfd of gas from its North Sea fields. Two leased LNG tankers would deliver 30-35 cargoes/year to the U.S. beginning in 1994. Previously, Statoil hoped to launch the project in 1993.
Statoil believes it can export 500 MMcfd as LNG in the late 1990s from mid or northern Norway offshore fields, which are too far from markets for production via pipelines.
The tankers would use one of several existing LNG terminals in the U.S. Production would be sold through Enron Gas Supply Co. LNG price might be tied to a basket of crude oil prices or under a long term contract calling for an above market price in early years with very small, fixed annual increases.
Norway wants to expand its 20% share of gas supply on the European continent. It also wants to increase its 20% share of the British gas market, which has been dropping as Frigg field depletes.
Statoil officials believe opening of eastern European economies offers export potential, especially if those countries offer to buy oil and gas in dollars rather than rubles.
Norvik said Norway is supplying 10% of the crude entering U.S. East Coast ports. "I expect that to increase. We are well placed to take on a larger share of this market."
He also said about one third of the gasoline production from Statoil's 130,000 b/d Mongstad refinery is exported to the U.S., and that volume also will be increased.
Norway is negotiating to have 35 gravity crude from 300,000 b/d Oseberg field accepted for trading on the New York futures market.
NEW COMMITMENT
Norvik, president of Statoil for less than 2 years, said it will not operate in the future like the typical state oil company.
Statoil has been through "a difficult period," enduring low oil prices and the "serious blow" of cost overruns in the Mongstad refinery upgrading, which forced extensive reorganization of the company.
"This turbulence is now behind us," Norvik said. "The Mongstad experience and the impact of lower prices have been utilized to restructure our organization and consolidate our operations. Through reducing costs and ensuring profitability at lower oil prices, we have established the required foundation to plan for further growth.
"I represent a company that has come to recognize that we have no alternative than to compete in the first league. Consequently, we cannot rely only on our unique resource base.
"Like the rest of the industry, we are fully dependent on our ability to recognize business opportunities, improve project execution, reduce our costs, improve our understanding of the market, and develop and inspire the people in our organization.
"Norwegian companies must face global competition even in our backyard. Only through building on competition and an appropriate risk/reward balance can we ensure that the best technology and innovative capacity are put to work."
Norvik said the 1990s offer limited prospects for real increases in oil prices. Volatility, "with its combination of fun and pain," will be the name of the game.
"The lesson we can draw from the 1980s is that we need to make business decisions that are strong and flexible so we can withstand long periods of unstable oil prices," he said.
There has been too little exploration in Norwegian waters in the past few years, Norvik said. For the first time, additions to reserves are less than production.
Exploration emphasis will be in areas near North Sea production and transportation facilities, making development of smaller fields economic.
Norvik is confident significant discoveries will be made in areas off mid-Norway and in the Barents Sea.
Copyright 1990 Oil & Gas Journal. All Rights Reserved.
