The interview: Taking a longer view

06.01.2014
Bente Nyland starts a new six-year term as director general of the NPD at a time when the oil companies want stricter prioritisation of projects. That reflects capital shortages and generally high costs. But Nyland says that the demand for long-term thinking in the industry’s investment decisions remains unchanged.
  • Bjørn Rasen and Emile Ashley (photos)

Bente Nyland"Our work will be even more important in the time to come. The key now is to ensure that the companies don’t take decisions they’re going to regret in 10, 20 or 30 years"

 

Pessimism prevailed in Norway’s oil industry when Nyland took office in 2007, but the dark clouds began to lift with time. Activity and investment have since exceeded most expectations.

The sharp decline in the production curve for oil has become less steep, and the forecasts indicate that the current level of output will be maintained beyond 2020.

Nyland was re-appointed director general by the Council of State in December. And the beginning of this second term has again been characterised by a change in the weather.

“When I started six years ago, there were grey clouds on the horizon,” she recalls. “Then the sun suddenly came out. Interestingly, my second term has begun with fresh clouds. The biggest worries for the companies now are costs and capital.”

So is history repeating itself? When Nyland took office, things where a little “dismal and grey” because the industry expected few large projects on the NCS – even though NPD resource estimates indicated that the end had not yet come.

“Discoveries were small and development largely confined to tie-backs to existing fields, large old fields were in decline and few saw prospects for major new ‘elephants’,” recalls Nyland.

“Nor did it help that oil prices were low, of course, and nobody foresaw that they could become as high as they have. That was the picture then – perhaps not sunset, but late afternoon.”

But something happened along the way. Oil prices shot up, and the portfolio of discoveries began to be developed because it became profitable.

Exciting new finds such as Edvard Grieg, Ivar Aasen and not least “Johan Sverdrup” were made. Asked what she thought when the contours of that last discovery became visible, Nyland says it proved the future cannot be predicted.

“It demonstrated, after all, that the NPD was right to say the NCS concealed substantial undiscovered resources. But I was surprised that such a big find was made in an established and explored area.

“That wouldn’t perhaps have happened without the technological advances made in seismic imaging, and it depended not least on somebody daring to take some other kinds of exploration strategy chances – to think a little out of the box.”

Many a champagne cork popped as a result of “Johan Sverdrup,“ but Nyland describes her own celebration as discreet. She regards the find as a game changer, making the NCS more dynamic and attractive.

“And the new discoveries occurred immediately after the tax regime had been amended, precisely with the aim of stimulating exploration activity. The timing was good.”

Now, challenges are queuing up at the start of her second term. “Our job is to help ensure the right choices for new developments, a strong focus on older fields and installations, and continued efforts to improve recovery,” she enumerates.

The question is whether measures to boost recovery from producing fields will be hit when a number of companies warn that they plan to set tougher priorities for their projects.

Nyland promises to keep a close eye on this. “It’s very good the companies set priorities, providing they get their preferences right and don’t throw the baby out with the bath water.

“That’s where we have a unique opportunity to point out that this involves skimming the cream, while our goal is to exploit the whole milkcan.

“Our work will be even more important in the time to come. The key now is to ensure that the companies don’t take decisions they’re going to regret in 10, 20 or 30 years.”

The natural question to ask then is whether the NPD regrets any of its actions over the past six years, or whether Nyland believes she can point to good results.

“We’ve helped to manifest the potential in new areas, and have completed big seismic survey programmes off Lofoten, Vesterålen and Senja as well as in Barents Sea South-East.

“We’ve steadily pursued big projects for maintaining oil production, such as Troll in the North Sea, and we’ve worked with Ekofisk to help the licensees take decisions which can sustain output for another 40 years.

“Recently, too, our pressure has succeeded – on a preliminary basis – in helping to secure a decision on a ‘Snorre 2040’ project which will be important for Norway’s resource base.”

She wants this development to stand as an important memorial to the government agencies involved: the Ministry of Petroleum and Energy as well as the NPD.

“We’re so spoilt for money in this industry, after all. Personally, I think NOK 1 billion is better than nothing, even it’s not as good as NOK 2 billion.

“But the outside world doesn’t always appreciate this. Many Norwegians want the oil resources in new areas to remain in the ground.”

That was precisely the challenge she highlighted in her previous interview with Norwegian Continental Shelf in 2008: getting the outside world to understand the petroleum industry and the effect of its revenues on the Norwegian welfare state.

“This challenge is still there,” Nyland notes. “The position hasn’t been made any easier by the public debate in Norway and the conclusions of the Intergovernmental Panel on Climate Change.

“Many people have a tendency to jumble climate issues with bad weather. And a number find it hard to grasp what value creation is. They only see great prosperity, money in the bank. And some say that Norwegians are rich, fat and idle. That’s not good.

“In my view, we must exploit the natural resources we’ve been given in the best possible way. Other countries, with far greater assets than Norway could ever dream of, have wasted them.

“They’ve gone to a small elite. We’ve managed things better here. This aspect is often forgotten. At the same time, we can put money aside for future generations.”

Nyland certainly appreciates the dilemmas and is no advocate of forging ahead at full speed. She sees it as her job and role to strike a balance.

“In the future, of course, we’ll get an energy regime with more legs to stand on. I believe regardless that we pursue a sustainable exploitation of resources on the NCS.

“Many of us in the industry want natural diversity and a good environment. It’s occasionally forgotten that we work to reduce emissions and discharges, and to find cleaner solutions.

“Nevertheless, we mean little in the big global picture. It’s difficult to get people to understand that our biggest contribution is the one we can make outside Norway.

“But we must naturally also do what we can at home – by reducing emissions from flaring, for example, and by supplying our offshore installations with power from shore.”

She believes that both sides of the debate have a need to sharpen their messages: “A lot gets exaggerated in the public space – in other fora, people talk together.

“We live in a time when everything has to be formulated in black-and-white. Conducting a lengthy debate with good reasoning is hardly possible any longer.”

Nyland still has great confidence in dialogue with the oil companies, even when their project priorities come under pressure and costs have become so high.

“This means we must put much more effort into manifesting asset value and, not least, document the loss of value from failing to take production seriously. We must highlight what the companies and the Norwegian state stand to lose.”

She emphasises that this is about conforming with Norwegian law. There is a reason, after all, why the companies have been allowed onto the NCS and given licences.

At the same time, they must fulfil certain requirements. This is clearly formulated in the Petroleum Activities Act, and Nyland expects the companies to comply with it.

“We’re occasionally accused of not understanding the industry. We understand it all right, but we have our duties. I’ve promised the Storting [parliament] that we’ll ensure optimum utilisation of all profitable resources. That’s what my job’s about.”

“Dialogue between government and companies” has occupied a key place in the Norwegian oil model from the start, and Nyland does not believe she has to enforce the requirements more vigorously over the next few years.

“That’s what we can do if we absolutely must. For the moment, it’s an instrument we haven’t wanted to use. We see it’s good professional work and good arguments which count – and win through.”

She looks beyond her forthcoming six-year spell at the helm when describing milestones and goals. The key word is “a longterm view”.

“The most important consideration when we shut down Gullfaks, Troll or other fields is that we can say with our hands on our hearts that we did all we could.

“It’s only then that the objective has been reached. My goal is to ensure this during my term of office. I expect more directors general will succeed me and inherit this issue.”

 

"I’ve promised the Storting that we’ll ensure optimum utilisation of all profitable resources. That’s what my job’s about."

 

NPD director general Bente Nyland with Tord Lien on his first visit to Stavanger after being appointed petroleum and energy minister. 
NPD director general Bente Nyland with Tord Lien on his first visit to Stavanger after being appointed petroleum and energy minister.
Photo: Lise Rist/MPE

 

"Other countries with far greater assets than Norway’s ever been able to dream of have wasted them. They’ve gone to a small elite. We’ve managed things better here. This aspect is often forgotten. At the same time, we can put money aside for future generations."

 

 

Bente Nyland
Bente Nyland 


The interview with Bente Nyland concluded with some pertinent questions on current issues.

 

You’ve always expressed optimism about the Barents Sea, even in the years when little or nothing happened. Do you feel today’s optimistic view of these waters is a little overdone?

What’s happened is great fun. The Barents Sea’s fate is that all the criteria for finding oil and gas are present, but aren’t put together in the optimum fashion we see in the North Sea.

The challenge then is that we don’t find giant fields, which means we must come up with solutions which can develop whole areas in a good way.


Possibly with Russia as a partner?

 

We have a good collaboration today through the Energy Dialogue. When we find more oil and gas, it could be relevant to expand this. We have experience of crossborder cooperation with Denmark and the UK. It’s also natural to imagine a collaboration with the Russians when the time comes.


We have a new energy mix and import requirements are changing radically, particularly for the USA. How will that affect Norway?

 

That’s not my business, but I’ve noted it. What’s happening in the USA is clearly a game changer. It alters the terms for transporting gas. Europe will nevertheless remain Norway’s most important customer in any event. Nothing indicates so far that this market will disappear. But the price level could change, and that might mean something for the new developments.


Six years ago, you didn’t exclude of the possibility of going back to being a geologist. Now you’re spending another six years as head of the NPD ... ?

 

I’m undoubtedly going to have to re-educate myself. Fantastic advances have been made in my field. Big changes occurred during my career as a geologist – from working with coloured pencils in the early 1990s to sitting with multiple displays and working in several dimensions. Returning to a profession where my knowledge derives from some time in the 1990s could be a big challenge.


Is the NPD well supplied with specialists to meet the challenges of the next few years?

 

I’m impressed at how knowledgeable all the new staff we’ve managed to recruit are. And I’m also pleased that we’ve managed to retain many of the able people who’ve been here a while.

We have little turnover. That indicates we’re doing something right, and not least that we offer many highly interesting jobs. New recruits to the oil company don’t get the same opportunity to work at the interface between profession, politics and administration.