Talking the business up
Bjørn Rasen and Monica Larsen (photos)
Being part of the Norwegian oil and gas industry is a source of great pride to Kristin Færøvik. “I’m proud of what this industry achieves every single day, and of the continuous contribution we make to Norwegian prosperity,” affirms the chair of the Norwegian Oil and Gas Association. “Quite a few people – who’re familiar with economics and know better – fail to mention this when they deliver a speech. That probably reflects Norway’s negatively charged public debate on oil and climate.”
Norwegian Oil and Gas and Færøvik have noted that three out of every four people in Norway consider it is important to retain the petroleum industry.
Such sins of omission by important opinion-formers have left Færøvik almost speechless more than once, particularly when she considers who was on the rostrum.
And striking somebody from Bergen dumb is a serious business. At the end of our interview, the conversation returns to the topic we started with – the industry’s reputation.
Our discussion takes place where Færøvik spends most of her time as CEO of Lundin Norway – its impressive premises at Lysaker just outside Oslo. Her office has an excellent view, but she is primarily concerned with the outlook for the industry.
Norway’s petroleum champions, who were plentiful during the early decades, have departed. Oil is now associated with climate change, and the heroes have become villains – to summarise the picture often painted in the public debate, at least.
Færøvik believes the image is more nuanced. “I’m not so sure the industry actually has a poor reputation. The voices which don’t wish us well get a lot of coverage. A polarised debate is perhaps of greater interest to the media than a rather more complex discussion.
“At the same time, we in Norwegian Oil and Gas see that the industry could be more open than it has been in the past, and talk more with rather than to those who challenge us.
“The world indisputably needs energy. There’s room, and a demand, for petroleum. It’s equally indisputable that we must produce it in a way the world accepts. That we accept this duality doesn’t emerge clearly enough in the debate.”
Norwegian Oil and Gas constantly measures popular support for the industry, and finds it good and broad-based – three out of four Norwegians say retaining the sector is important.
But Færøvik accepts that this backing varies with age and geographical location, and that it is particularly important for the industry to establish a good dialogue with young people.
Færøvik points out that exploration activity has increased following the entry of new players – who account for a large proportion of discoveries in recent years.
Advanced “The question we ask ourselves in the industry is how we should operate with oil and gas in Norway,” she says. “We’re a very advanced industry. “That’s because we’ve had farsighted governments thoroughly regulating what we do, and because as a sector we have set goals which go beyond the legal minimum through our road map for 2030 and 2050.”
She finds it hard to penetrate the sound barrier with the positive stories. Things going wrong get the biggest coverage. Creating an understanding of the technologically advanced nature of NCS operations is difficult.
“And we mustn’t forget our unique supplies industry, which competes globally. I think it’s sad that this hasn’t attracted more attention.”
She also expresses surprise at the rhetoric from a number of people in industry and from many opinion-formers in Norwegian society.
“They’re perfectly well aware of how important this industry is for the economy, but they don’t talk about it. They should, even if they’re naturally concerned to see the country fulfil its obligations under the Paris agreement.”
And Norway can stay within those terms while also maintaining an active oil and gas sector, Færøvik maintains. “We’re very ‘competitive’ globally on emissions and the way we operate.”
She points to comments by other experts that it makes no sense for the NCS to shuts down first, either from a national, economic standpoint or in a global energy and climate perspective.
Asked whether existing operating parameters promote continued activity, the industry’s foremost representative takes a brief moment to consider the question before responding.
“We’re dependent on predictability and stability. I don’t hear any signals that the operating parameters on the NCS ought to be revised.”
In her view, stable parameters have been and are a competitive advantage for the Norwegian industry.
Nor are any amendments needed to boost activity on mature fields, she says. “Not right now. Stability is the most important consideration.”
She also says this out of consideration for the new players who have entered and will continue to enter the NCS. They have to know what they are coming to, without sudden negative surprises.
“Look back and see what happened when the government made provision for new players in 2004. The figures show a radical change in who was drilling exploration wells.
“Getting in new companies has had an effect on exploration activity. The other aspect is what has been found in the same period, with newcomers responsible for half the discoveries made.”
Færøvik believes this relates to the maturity of parts of the NCS. What is not material for a big company may be profitable for Lundin, for example – and this has been the trend in recent years.
Not only have more small companies moved onto the NCS, but most discoveries are also smaller. Production is outstripping new resources. Færøvik has only one prescription.
“We must continue to explore. And we must have acreage to explore in. The government must continue with the awards in predefined areas (APA).”
She also wants to see that blocks awarded are not left unused for long periods. If they are not being worked with, these licences must be relinquished. Acreage can thereby be recycled.
Many of the discoveries in the Norwegian North Sea over the past decade were made in acreage which had been awarded and then relinquished, she points out.
“Production licence no 1 is an excellent example,” Færøvik adds with a broad smile. This was the recycled area where Lundin made its major Johan Sverdrup discovery.
Her attention then turns to the Barents Sea, where a huge area is available to explore and where the industry has only just got going.
She observes that relatively few wells have been drilled in the far north compared with the numbers in the North Sea. And she is convinced that more can be found there.
“We base that view not only on our own assessments but also on the NPD report on undiscovered resources [which puts the bulk of them in the Barents Sea]. The NCS is still attractive.”
Færøvik admits that the road to the big resources is becoming ever more demanding. After all, the easiest discoveries have been made.
“So we’re very dependent on technological progress,” she says. And that is being made – in such areas as seismic surveying, for example.
New solutions are providing much better images of the sub-surface than before, supplemented by innovative data acquisition methods.
A different and depressing picture is provided by cost and oil price curves for the past five-six years. Can Færøvik, as the industry’s top representative, promise that her member companies have learnt the lessons from the painful downturn they have been through?
“I hope so,” she replies. “The responsibility lies with each company. Our concern in Norwegian Oil and Gas is to follow up and operationalise the KonKraft report published in January 2018.
“We have no intention of dropping that work and the report’s recommendation, even if the actual work is being done at the companies.”
She has received no signals about changes in behaviour so far. But some might perhaps need to be considered now that times have improved.
“Parts of the supplies industry may have entered into contracts which aren’t sustainable in the long term,” she concedes. “Adjustments could be made there.”
That is simply because suppliers must have enough of a margin to make a living. Færøvik nevertheless emphasises that they themselves must deal with overinvestment in capacity – supply must be tailored to tomorrow’s realities and needs.
This is also in the interests of the oil companies, she believes. “The way we collaborate will persist. I don’t see any signs that anyone wants to let go of that.”
She cites equipment and spare parts as an example of where efficiency improvements and coordination are required. Each company holds its own spare part stocks today, often in the same warehouse as a competitor.
In her view, overviews must become available on a digital platform. “We must stop procurement being duplicated, triplicated or more, the way it is today. I envisage a much more efficient supply chain in the future.”
That brings her to the new reality which a huge increase in data processing capacity has created, and she again cites seismic surveying as an example.
This sector is precisely about increased data storage and processing. At the same time, that has become cheaper and much faster.
To strengthen exploration for oil and gas even further, Færøvik wants all information from every available well to be accessible.
“We have vast quantities of data from all the wells drilled on the NCS,” she notes. “The NPD, not least, holds huge amounts which aren’t so easily accessible. We want them digitalised.”
That could lead in turn to better and more efficient drilling in the hunt for new discoveries. Operators can see relationships they failed to detect in wells during the 1980s, for example.
“Our ability to relate such information to other available data opens completely new possibilities,” observes Færøvik. “That’s what happened, after all, when we found Johan Sverdrup – which started with the Luno discovery.”
She adds that the whole model for operations on the NCS is changing as a result of the opportunities provided by increased data capacity.
“We have access to all the information in the office on land. We’re no longer dependent on going offshore to get hold of it.”
All the operators are moving towards condition-based maintenance, for example, replacing the calendar-based approach which has been the most normal method in the past.
Maintenance is thereby based on the actual and physical status of the equipment concerned.
Færøvik says the offshore workforce will undoubtedly become smaller, and those left on the platforms face a different working day. Paper will disappear, with everything they need on a tablet.
“We’ve got to change the way we work in order to reap the full benefit offered by the opportunities,” she emphasises.
All the changes demand that companies qualify their operators to master a new working life, Færøvik says. They need to invest in the expertise of their employees. And the industry must show the young that it can offer interesting jobs.
“It’s a question of credibility in relation to a labour market. And we must present all our interesting activities – the most exciting things you can imagine in technological terms.”
Being allowed to work with top technology is not enough to attract the most talented youngsters to the industry, she admits, and fully understands that “climate” plays a key role.
“All we can do is to show how we operate, that we do our job in a responsible way, and that room still exists for oil and gas in the energy mix.
“Those following in our wake can very much be involved in influencing the way we take the petroleum sector forward. That’ll be with less energy consumption and even smaller emissions.”
This will be necessary if the industry is to go on being hugely significant for Norway’s continued prosperity, Færøvik emphasises. And everything must be put in perspective.
Norway supplies the world with energy, which it needs. “We can manage here with hydropower. But that’s not the case elsewhere. Almost a billion people still lack electricity.”
She also points to Norwegian gas as an important contributor to reducing energy-related emissions in Europe. And she notes that petroleum has become essential to daily life.
“About 40 per cent of oil and gas output is consumed by the petrochemicals industry, making products we surround ourselves with. Try to image a home without them.”
Færøvik, too, is concerned about the footprint which will be left behind. Responsibility rests on the oil and gas industry, she agrees. But also on the consumers.
“One of the most important things we can do is to put a stop to waste – at every level. That applies to the petroleum sector as much as to every one of us. Prosperity calls for energy, travel calls for energy – and we could go on and on in the same vein.”
As the CEO of Lundin Norway, she has seen that cost-consciousness can be translated directly into emissions and discharges.
“Avoiding waste is the most important thing I can do for the environment in my job. And that gets reflected on the bottom line.”
“One of the most important things we can do is to put a stop to waste – at every level,” says Færøvik. “That applies to the petroleum sector as much as to every one of us. Prosperity calls for energy, travel calls for energy – and we could go on and on in the same vein.”