When push comes to shove

24.06.2016
Low oil prices have made the oil companies more nervous than before about taking investment decisions. Astri Fritsen’s job is to urge them to act – which is often all it takes.

| Alf Inge Molde and Morten Berentsen (photos)

Astri Fritsen, NPD

Astri Fritsen, NPD

 

"Our goal is dialogue and mutual trust."

 

Think of a mature fruit tree where you only have one chance to harvest its crop. If you remove the ladder, it will never go back up again. But you set to work.

First you pick the low-hanging fruit, which are easiest to reach. You then climb higher up and further out. Finally, you stand and stretch as far as you can for the final take.

Although you want to gather as much as possible, the time comes when your motivation fails. The time and effort look like being too much, and you give up.

“Our job is to stand on the grass below and push the pickers with encouraging shouts,” says geologist Fritsen, who follows up many of the fields in the northern North Sea.

And the NPD certainly cheers the companies on, she observes. “’You can accomplish this,’ we cry. ‘Don’t give up, use your creativity’.”

Important

This is one of the directorate’s most important jobs, covering every aspect from pressing for new developments to encouraging maximum value creation and the most cost-effective area solutions.

It also represents a very necessary role. The NPD sees that a number of operators are struggling with reduced profits, and fears that low oil prices mean required action will not be taken.

That in turn could mean leaving petroleum in the ground, a challenge when more than half the oil and gas resources on the NCS remain to be produced.

Fritsen says the project studies being conducted by operator companies are more detailed than before, and discussions between partners last longer than when crude prices were high.

Several rounds of discussions are needed before decisions are taken, with uncertainty and risk as key issues. Norwegian projects also battle for investment within the big international companies.

The NPD understands the dilemma, says Fritsen, who notes that developments are not necessarily as profitable as they were. “But there are limits to how anxious the companies can be.”

She points out that an apparently uneconomic project today could be profitable in a lifetime perspective. So the NPD must sometimes go beyond pushing the companies. Many means of enforcement are enshrined in legislation and regulations.

Technical

This shoving preferably begins with technical meetings. The NPD then seeks more information by e-mail, asks clarifying questions, gives advice and provides positive feedback.

If that fails to do the trick, meetings are called at a higher level to express the government’s expectations. Supplementary studies can also be requested and action encouraged.

The next step is to follow up with letters to the licensees, contacts at senior management level with a clear message, and committee meetings where the government’s views are made clear.

Ultimately, the Ministry of Petroleum and Energy can decide to impose orders and demands. It can also reject formal applications or set conditions for approving them – particularly relevant when the licence is approaching its end.

“We prefer not to get that far,” says Fritsen. “Our goal is dialogue and mutual trust. Amicable meetings at a lower level usually suffice.”

Change

She joined the NPD in 1994 after 12 years as a geologist at Norsk Hydro. The need for a change was supplemented by a desire to work for society.

“Resources on the NCS belong to the Norwegian people,” she notes. “At the NPD, we work on behalf of the community to ensure that it gets as much as possible of the value and to prevent somebody simply skimming the cream.”

But moving from the commercial side to public administration was not a simple matter. One comment Fritsen heard was: “Oh, so you don’t want to work at a more professional level.”

That almost made her turn tail. Although the NPD is a technical regulator, she sees today that it does not provide the same opportunities for in-depth work as an oil company.

More than 50 specialists are employed by the licensees on studying the sub-surface structure of Statfjord, for example. The NPD devotes less than two work-years to this field.

The challenge is to learn what is significant and where you are going to draw the line, rather than taking a detailed approach to everything.

Massive changes have also occurred, Fritsen notes. From making a big effort to monitor a few big discoveries, the NPD now has to deal with more than 80 fields.

Through close follow-up and by applying good methods for setting priorities, the regulator knows where it has to make a commitment and where its own technical work has the biggest effect.

Adapt

Low oil prices may be challenging, but they are not all bad. Fritsen says a number of specialist teams are working well to adapt to the new conditions.

Professionals become inventive when the times get tougher. And the NPD understand that the point will ultimately be reached when no more can be achieved.

Before then, however, every avenue must be explored. Has anything been overlooked? Is new technology available? Should research be done? Can neighbouring discoveries contribute?

When oil prices were at their lowest, some Norwegian fields were close to a negative cash flow. The companies cut back and implemented improvements while waiting for prices to bounce back.

Shutting down a field and removing installations is expensive, so it can pay to bide one’s time. And cessation plans for a field must be submitted at least two years in advance.

These proposals must make it clear that every stone has been turned in the hunt to recover the final drops from the reservoir concerned.

“There’s a limit to how far you can stretch,” Fritsen admits, even though this can be hard to accept. “You sometimes have to leave the smallest fruit on the thinnest outer branches behind.”

 

Astri Fritsen, NPD

Dilemmas.
Projects which were profitable before are not necessarily commercial today. “But there are limits to how anxious the companies can be,” Astri Fritsen emphasises.