For more than two decades, we have been an important supplier of Norwegian oil to the US and Canada. A new chapter is now being written in our history, which involves growing entitlement production from offshore and land-based oil and gas fields in both the US and Canada. And we are taking our first steps as an exploration operator in Alaska through the award of new licences. Deliveries of liquefied natural gas from Snøhvit to the US have also begun.
Gulf of Mexico
By acquiring licences and companies, we have built up a portfolio in the US Gulf of Mexico (GoM) which makes us the fourth largest deepwater player in this region. Our current production from the GoM is 20,000 barrels of oil equivalent per day. Production will increase strongly in the years to come.
The first oil explorers in the Norwegian North Sea during the mid-1960s brought experience from shelf areas of the GoM to the Norwegian continental shelf (NCS), and found oil. In the space of a few decades, Norway has built up
heavyweight expertise in offshore operations. With experience from some of the industry’s most demanding development projects on the NCS, we in StatoilHydro are now getting to grips with the extremely difficult reservoirs found in the deepwater GoM, relying on our NCS experience.
We will be taking delivery of two new drilling vessels in 2007 and 2008. Representing the most advanced technology ever seen in this area, they will be deployed in the GoM.
Promising
We currently participate in half of the 12 largest discoveries made off the US Gulf coast. A new discovery called Julia was announced at the beginning of 2008, in 2,000 metres of water. Drilled to a total measured depth of 9,500 metres, the discovery well was a result of an exploration agreement we concluded with ExxonMobil in 2005.
“This is a promising oil strike,” reports Helen Butcher, who heads our exploration effort in the GoM.
It helps to strengthen our position in the Walker Ridge area, where we are a substantial licensee, and confirms our faith in this region.
We are involved in the development of Jack and St Malo, two other substantial finds in the vicinity. Both are planned to come on stream after 2013.
In early December 2007, we also announced that a discovery had been made near West Tonga in Green Canyon. These activities underline our strategy of building up an important new product-ion source in the GoM.
Great potential
The US Mineral Management Service (MMS) estimates potential reserves in the deepwater GoM at more than 50 billion barrels. We have positioned ourselves at the forefront of the search for these energy resources. Our experience and technology from the NCS are highly relevant for this part of the world.
In addition to their water depth, reservoirs in the GoM lie deep beneath the seabed and have a very complicated geology. Thick layers of salt cover the reservoir rocks, which makes it difficult to spot oil and gas deposits on seismic charts. The reservoir has tight rock and high pressure. Achieving a high recovery factor for their oil and gas thus represents a challenge.
Something to contribute
“We’re known as a company which gets a lot out of its resources and which is able to handle very complicated development projects,” says Øyvind Reinertsen, who heads our North American activities. “This experience will represent our most important contribution to increased production and value creation in deep GoM waters. Despite the complexity, we believe we have something to contribute here, and it’s my clear impression that we’re regarded with respect as a company.”
Randy Perry is one of the US staff at our Houston office and serves as asset manager for our interests in the Tahiti field, which is due to come on stream in 2009. A third-generation oilman, he has worked in the industry for 30 years. He has this to say about opportunities in the GoM:
“There are a lot of barrels out there, but discovering, developing and producing them will take much creativity.”
Growth
Increased activity in the GoM will be matched by an expansion in our Houston organisation, which currently totals almost 250 staff. The number of employees is expected to increase considerably in the years to come. Recruitment will primarily occur in the local labour market, and we are going to have a great need for specialists with experience from deepwater operations in the GoM.
We regard the US GoM as one of the most interesting exploration areas currently open to the oil industry. External frame conditions are characterised by political and economic stability and predictability, while the oil and gas fields there lie on the threshold of the world’s largest energy market.
The American market
Since the mid-1980s, we have been an important supplier of oil from the North Sea to the US and Canada. These sales are handled from Stamford in Connecticut, and our office there has been responsible for selling three billion barrels of oil and products to the North American market over the past 20 years.
We expect to be able to deliver crude to the US from sources in the GoM in coming years. Our commitment to oil fields off Brazil and our oil sand reserves in Canada are also seen as relevant for the US market in the future. Our Venezuelan oil production is also favourably located for delivery to the US.
In addition, we expect to supply large volumes of gas in the form of LNG from the Snøhvit field off northern Norway and the Melkøya terminal outside Hammerfest, the world’s northernmost town. The gas liquefaction plant at Melkøya is the first in Europe and the world’s most northerly. LNG will be delivered to the US market via the Cove Point terminal in Maryland, where we have secured access to an annual import capacity of 10.4 billion cubic metres. Substantial growth is forecast for the LNG market in coming years, and we are well positioned to take advantage of these market opportunities.
