Way forward for the NCS

19.12.2016
The resource base is unchanged and production still high. Oil and gas will remain the cornerstone of Norwegian prosperity for a long time to come – despite the tremors which have hit companies large and small, and unfortunately many employees as well. The question is how the industry is to get over the hump.

Bjørn Rasen and Monica Larsen (photos)

Director quartet. They see the challenges, but also the opportunities. From left: Ingrid Sølvberg, Sissel Eriksen, Kjell Agnar Dragvik and Inger Lise Strømme.

Director quartet.
They see the challenges, but also the opportunities. From left: Ingrid Sølvberg, Sissel Eriksen, Kjell Agnar Dragvik and Inger Lise Strømme.

 

The following questions on the challenges facing operations on the NCS have been put to the NPD’s strategic leadership – the four directors who sit on the management committee with director general Bente Nyland:

 

1. What are the two most important issues for your area of responsibility, and what can the NPD contribute?

2. How can resource loss be prevented – does the government have the sticks and carrots needed in today’s circumstances?

 

Kjell Agnar Dragvik, director analysis and framework

At a time of big oil price movements, producing good forecasts for activity on the NCS is challenging in both short and long terms. That also provides a good reflection of the main challenges facing the industry.

The NPD believes a long-term resource potential still exists which can create big value for Norway as a nation. Our primary observation is that production is being maintained in both long and short terms, even though investment has fallen substantially in recent years.

What we do not know is whether the cost reductions are so large that they will affect long-term resource extraction. We are therefore keeping a very close eye on this.

My responsibility also covers the Oil for Development (OfD) programme. This is challenging work, because it often takes place in and with countries whose institutions differ from Norway’s.

As a result, they may not be as well placed to manage their resources. At the same time, our people involved in this activity find that seeing the contrasts helps them to develop. For us as an institution, it is important to provide relevant players, and the general public, with correct and updated information about operations on the NCS.

The system in Norway makes it profitable for the companies to produce commercial resources, and we pay close attention when players apparently promote shortterm interests.

And there are milestones in both petroleum legislation and agreements when the companies must document that they are making a prudent assessment and taking account of long-term interests.

But it is important to emphasise how large a role is played in competitiveness by producing cost-efficiently and in line with prices in the oil and gas markets.

The authorities do not play the principal role there. That is something the industry must do.

 

Inger Lise Strømme, director data management and organisation

Renewal and digitalisation are important terms for the future. We must ensure that the organisation, the tools and the instruments are tailored for tomorrow’s needs – internally, with the government and with the petroleum industry.

We must seek new ways of working and exploit the opportunities offered by new technology. That makes demands on our competence, and we must pull in the same direction.

This is not only about technology, but also about people and organisation. We need to develop and highlight the NPD as a good and attractive workplace.

It must offer development opportunities and interesting challenges for staff, and possess the expertise and capacity to do its important job for society.

We are also concerned about the same issues in the industry. One challenge is to identify our role in this. What needs no intervention and where can we make a difference?

A specific challenge is to ensure that we manage data from the NCS in a good and secure manner. We must ask whether the way we have acted so far is the right approach for the future. In any event, we have a need to renew the technological platform for reporting, management and communication.

Regardless of the price and cost regime, it is important to share data and knowledge, and to interact intelligently. The industry could benefit from exploiting economies of scale, standardisation and sharing experience.

In this picture, the NPD has a role as a driving force for good interaction and through operating or supporting common arenas.

 

Ingrid Sølvberg, director for development and operations

We see a changing offshore sector. This means our commitment must be strengthened so that time-critical oil and gas resources are given priority and existing facilities are exploited to the maximum before being shut down and removed.

A greater degree of coordination across production licences – good area solutions – is becoming increasingly important. It could help to make a larger number of marginal fields commercial. Adopting new technology boosts opportunities for success.

In recent years, we have seen that companies are giving increasing emphasis to short-term thinking when deciding on investment in developing discoveries and on measures for improving recovery from fields.

Our most important job is therefore to shift attention and decision criteria towards solutions which provide the highest overall value creation – including for society – and protect future upside opportunities.

After a period of very high costs, we have seen reductions of 30 to 50 per cent over the past 18 months. We then expect the companies to see that more projects have become commercial.

The current climate debate creates uncertainty about the size of production from the NCS. We are also seeing a decline in the number of young people choosing petroleum subjects at university.

This fuels fears of an aging workforce and an expertise deficit. We must therefore help to maintain an understanding that oil and gas will be produced for several decades to come.

The NCS is globally competitive. The companies do a good job. But we also see that pressure from the government is sometimes needed to secure decisions which maximise value for society.

Our set of instruments has so far been adequate for securing profitable management of the oil and gas resources.

A close dialogue is being maintained between government and companies, and we find that the companies are listening to signals from the government.

We want things to stay that way in the future.

 

Sissel Eriksen, director exploration

The decline in the number of exploration wells worries me. Several years of high activity were replaced by a downturn in 2016, and I fear the reduction could be even greater in 2017. This is not a unique Norwegian development, but part of an international trend as the companies adjust to lower oil prices.

Maintaining a high level of drilling on the NCS is important for sustaining oil and gas output from around 2025. But production is not a matter of course – exploration and discoveries are needed. Cutting spending here is like eating your seed potatoes – it will hurt in the long run.

Good access to data, a steady supply of new acreage and good operating parameters are the government’s contribution.

It is particularly important for us that the continuous geological evaluation of possible prospective acreage is maintained in order to allow timely and efficient exploration.

That ensures good resource utilisation and a sound basis for maintaining oil and gas production.

Internationally, we see the big companies consolidating and paying less attention to long-term and demanding projects. Signs of the same can be seen on the NCS.

In that context, it was unfortunate that several of the large companies failed to apply in the 23rd licensing round. This is my second worry.

We need the big players to continue developing the Barents Sea in the same way they did in the North and Norwegian Seas. Substantial investment will needed to establish the Barents Sea as a petroleum province.

More than half Norway’s undiscovered resources lie in these waters. The willingness and ability to take risk by testing new plays and innovative technologies are very important for realising this potential.

Exploration today is very advanced high-tech. We need a diversified player picture with a substantial share of solid and innovative players.

We consider it very important to map and prove resources in mature areas and around timecritical facilities in order to avoid losing key infrastructure too early. We will be very proactive here over the next few years.

Attractive acreage with petroleum resources remains on the NCS if people want it to be exploited. To maintain the production curve, these areas must also be opened and explored.

Access to attractive exploration acreage is important. And exploration and development take time, so this cannot be delayed for too long.

 

Still optimists. The NPD’s strategic management. From left: Kjell Agnar Dragvik, Inger Lise Strømme, Sissel Eriksen and Ingrid Sølvberg.

Still optimists.
The NPD’s strategic management. From left: Kjell Agnar Dragvik, Inger Lise Strømme, Sissel Eriksen and Ingrid Sølvberg.