Fruitful collaboration

06.01.2015

Comment Bente Nyland, director general, NPD

Takoradi in Ghana

Local adaptation.
Takoradi in Ghana, one of the new oil nations in the International Upstream Forum. Participants can learn from work done elsewhere, and adapt it to their own national conditions.
(Photo: Emanuel Baah)


An important lesson to be drawn from the latest meeting of the
International Upstream Forum (IUF) is that everyone concerned – operators, the industry and the government – needs to do their homework even better before new projects are launched. That applies as much to a licensing round as a field development.

Forty leading representatives from 13 nations attended the sixth IUF in Stavanger earlier this autumn, with the NPD as the host. This forum allows national regulators responsible for resource management to share experience in order to strengthen collaboration with and follow-up of the industry.

Although the forum is basically a multilateral collaboration, it also provides the basis for bilateral conversations – which reinforces Norway’s influence in international cooperation. And, not least, it

builds relationships. Participants this year included experienced producer countries such as the USA, Canada, Australia, the UK, Mexico, Brazil, Nigeria, Ireland and Denmark. Newer oil nations such as Ghana, Israel and Iceland also attended.

Learn

Forum participants have different histories, cultures and backgrounds. But they can all learn from the work done by others,

adapted to their own national conditions. Not reinventing the wheel in each oil and gas nation must be of general interest.

Norway also applies experience from the IUF in the Oil for Development programme run by the Norwegian Agency for Development Cooperation (Norad), where the NPD, the Petroleum Safety Authority Norway and Petrad are important players.

I had the pleasure of opening this year’s forum. It is always interesting to hear about developments elsewhere in terms of new discoveries, developments and regulatory changes. This proved a fruitful two-day event, where experience and views were exchanged.

One of the relevant issues discussed is how governments can become better at following up the companies in the exploration phase, with particular emphasis on deep seas and Arctic waters.

Management

The question is how risk management can be conducted during the exploration phase. New resources are often located today a long way from established infrastructure and in smaller discoveries, and the cost of recovering them has risen sharply.

A number of challenges need to be overcome. How, for example, are we to ensure good resource management and determine that operational risk is being handled well? Oil and gas nations such as Canada, the USA, the UK and Norway have common interests
here – and much to learn from each other.

Countries such as Brazil, Nigeria and Mexico are in a phase characterised by extensive restructuring of their administrations, and want to draw on the experience of others. Norway can learn a lot from its big neighbours to the west, particularly for activity in deep Arctic waters. Examples include different methods of data acquisition and risk management for offshore operations.

The companies often cooperate closely with the supplies sector, but collaboration between government and industry has not been equally good at the international level.

While regulators and operators must maintain a healthy distance, openness and predictability are in everyone’s interests. We have been successful with this in Norway, and a number of other nations are accordingly interested in learning from us.

Overview

Government in Norway collects information from the companies and maintains an overview of activities. This equips us to produce good analyses of the NCS and to follow up plans and operations by the companies in a positive way.

We are also a pioneering nation in making data available, so that the companies have the best possible information when they seek new production licences or face drilling decisions. Instead of acquiring data, the players can devote their energies

to interpreting it. This is costeffective. Everybody is served by minimising the number of dry wells drilled and avoiding the waste of money which occurs when existing information is inaccessible.

A US debate on how risk can be better managed when new licences are awarded has followed the 2010 Macondo accident in the Gulf of Mexico. The Americans have drawn in this work on experience and practice from other nations.

Financial

Another subject discussed at the IUF meeting was managing financial risk in major offshore oil and gas projects. Costs have greatly exceeded original estimates in far too many of these, whether they involve developments or clearing up fields which have ceased production.

That is an issue which concerns all the producer nations, reinforced by the rising level of costs in the petroleum sector.

The NPD produced a report last year about lessons learnt from developments in recent years. A key conclusion was that better work needs to be done in the early phase of a project to avoid cost overruns.

This subject is closely allied to national management of revenues from the oil and gas industry. Norway has much to contribute on how such income contributes to building good social welfare.

Recovery

Norway also plays a key role in the third topic on the IUF agenda – improved recovery from offshore fields, and strengthening followup of reservoirs and developments on mature producers.

Experience shows that regulators like the NPD must be a driving force in ensuring measures which require investment to improve recovery from mature fields.

Such work begins as early as the development planning phase, which should take account of later measures to maximise recovery of the commercial resources in a field – even though margins are lower in its final years.

That subject also interacts with the environmental and climate debate because energy is needed to get out the final producible resources in the fields.

This is unlikely to be the last time that such considerations are illuminated and debated in the IUF and other arenas.