Podcast with the Director General

08/05/2020 Norwegian podcast translated into written English.

Bjørn Rasen: I would like to welcome everyone to this podcast, a conversation with Director General Ingrid Sølvberg who is invited here on the occasion of the fact that she was scheduled to give a speech at the Barents Sea Conference last week, we will get back to that, but first, since we are in this special situation, you are now the Director General of an organisation with more than 200 people who are sitting in their respective home offices.

What has that been like?

Ingrid Sølvberg: Well, obviously, this has been a somewhat different start to the appointment as Director General than I envisaged. When I started, one of the most frequently used words since I became the Director General – both by the media and other places – is probably the word crisis.

We talk about the climate crisis, the virus crisis, financial crisis, oil crisis, crisis management, crisis preparedness, crisis management, etc.

The perfect storm as many will say, hit us in March and that has resulted in a fairly dramatic situation and that leaves its mark on us both as a nation, the industry, organisations and individual people.

As you say, now all of the NPD’s employees are now sitting in their individual home offices. What started as a state of emergency 7 weeks ago has now turned into the everyday reality.

And having said that, I would like to say that the new everyday is actually functioning very well. And I am very satisfied with that - We deliver what we are supposed to. We are working hard and getting the job done.

Having said that, I must say that I really look forward to seeing everyone back at the office here and I also look forward to having external contacts face to face to a greater degree in the time ahead.

BR: Everyone in the NPD has their tasks and here all the men and women are still at their posts, but the situation out in the industry is different – you mentioned the word crisis in the beginning.

IS: There is no doubt that this is a serious situation for the petroleum industry. This corona pandemic hit us actually at the same time as the world’s most powerful oil producers could not reach agreement.

That has resulted in the oil market is over-flowing with oil at the same time as demand for oil has been dramatically reduced, and that has led to a decline in oil prices. A low oil price gives an immediate effect as we see it, with cuts in exploration budgets and exploration activity. We see reduced investments and that affects project activity and general cost cuts.

The companies are naturally reluctant to spend money. What we are concerned with and worried about are the long-term consequences that this may have for both production and total resource extraction. So we are monitoring the situation very carefully and are perhaps especially vigilant on what are called time-critical activities. So we are concerned with, perhaps two things in particular.

One of them is that companies must not make decisions which have unfortunate consequences on long-term resource management.

The other thing that we are also concerned with is that the oil companies balance the considerations for their own cash flow with the need to have a viable supplier industry also when this is over. Because it takes time to build up a viable supplier industry and it takes a short time to dismantle it, so this is unquestionably a serious situation.

BR: Despite the fact that we are in the middle of what we must call a crisis for the industry, we must allow ourselves to have a long-term perspective on development for example in the Barents Sea.

So – what is the situation with exploration wells and exploration activity and further development in the Barents Sea in the time ahead?

IS: What we have said earlier and what is important to remember is that there are great opportunities in the Barents Sea in the time ahead as we see it.

There is a lot left to explore and there is a significant remaining resource potential in the Barents Sea.

We estimate actually, that about 44 per cent of the remaining resources, and by that I mean both what has been discovered and not yet produced and what remains to be discovered, 44% of that is in the North Sea. Roughly, the rest of the remaining resources on the Norwegian Shelf are distributed relatively evenly between the Norwegian Sea, the Barents Sea South – which is the opened area and the Barents Sea North, which is the unopened area.

We also believe, that of the undiscovered, total on Norwegian Shelf today, that just under 30% is found in in the opened part of the Barents Sea South. So therefore, we are concerned with continued exploration in the Barents Sea.

BR: To throw in even a few more numbers - our factpages say that 157 exploration wells have been drilled in the Barents Sea South and 50 production wells, compared with the North Sea and equivalent numbers there are 1258 exploration wells and as many as 4337 production wells.

What does that tell us about the Barents Sea South as a province?

IS: The simple answer there -that tells us that there is much that remains to be explored in the Barents Sea South. The numbers you mention tell their story. In addition, you can include that the open area in the Barents Sea South is nearly double the size as the area covered by the North Sea.

Therefore it is important that there is still an appetite for exploration and investigating the area in much greater detail.

BR: Do you see any signs or any elements that are important now, that are important for new enthusiasm, or to maintain future activity in the Barents Sea?

IS: Well, it is clear that, to have an appetite for exploration, so it is important that there is a way of developing potential discoveries that might be made. What we saw in January was that Gassco presented a new report on transportation opportunities for gas from the Barents Sea South.

Here the NPD contributed both estimates for both proven and undiscovered oil and gas resources and that report presented by Gassco in January shows that it can be socioeconomically profitable to invest in increased transport capacity.

This can show and be important to achieve continued profitable production of gas that has already been discovered. But, in addition, we estimate that, with the large remaining resources that may be found in the Barents Sea South, new infrastructure can reinforce the incentives for exploring further for these resources.

BR: We have previously noted that some companies have been a bit lukewarm as regards exploring for gas. That might seem a bit strange since we know that about half of the undiscovered resources on the Norwegian Shelf are gas. Are there grounds for greater optimism here now?

IS: Yes, I think so. What is happening now is that Gassco is working on starting a new study to examine in detail the alternative export solutions from the Barents Sea South.

That is intended to be a joint project between Gassco and the industry, and the companies are positive towards participating and the fact that they take a positive view of this in the times we are now experiencing, is very good.

The study has not yet been started, but we are cheering on this type of initiative and believe it is important for achieving good resource management in the Barents Sea South, also in the future.

BR: In the midst of all of this, Ingrid Sølvberg, there is another hot potato in the public debate in recent times, namely where this ice edge zone should be drawn - does that have any impact on potential renewed optimism for potential gas export opportunities?

IS: The Government presented its new plan for management of the Barents Sea, where they also propose a new boundary for the so-called ice edge zone which has been talked about so much.

What was presented does not have a major effect on the opened part of the Barents Sea South.

The exception is an expanded area with restrictions on exploration drilling during nesting season for seabirds. That is, there will only be permission to conduct exploration activity during a few months of the year.

Another new element was the area with the exploration cut restrictions around Bjørnøya and along the coast of Troms and Finnmark was expanded from 65 to 100 kilometres.

BR: As Director General, are you satisfied with the proposal that has been presented, viewed from a resource perspective.

IS: As I said, this does not have a big impact on what is awarded acreage and which directly affects the petroleum industry right now. So right now, we will deal with what the Government and the Storting have decided as regards management plan work.

BR: OK. Thank you Ingrid Sølvberg for that, and I expect that maybe at the next Barents Sea conference next year there may be a little more concrete decisions made regarding this matter.

IS: We will have to wait and see.

BR: Thank you very much.

IS: Thank you.

Updated: 08/05/2020

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