“Values for the future –The Norwegian Petroleum Directorate’s outlook”

NFES meeting Solagården

October 4th, 2017

Alexey Deryabin

The Norwegian Petroleum Directorate (NPD)

• A Governmental agency reporting to the Ministry of Petroleum and Energy

• 45 years: Established in 1972, office in Stavanger an Harstad and approximate 230 employees

• Knowledge driven with strong competence environments in geology, technology, reservoir, economy, data management and more

Photo: Emile Ashley

The Norwegian Petroleum Directorate

Main goal

Contribute to realizing maximum value for our society from the oil and gas activities through prudent and efficient resource management which also safeguards consideration for health, safety, the environment and other users of the sea.

“With the law on our side”

4

• The petroleum regulations enable State control and oversight

• Tradition for governance through framework conditions, not orders

• Regulations form basis for the NPD’s tasks and roles

• State governance and management in all phases of the activity

• Values shall benefit the entire Norwegian society

• Activity requires a licence / concession

• The oil companies are responsible for the operational activity

• Instruments:

• Taxes and fees

• The Petroleum Act

• Follow-up of the activity -> ensure that as many resources as possible are recovered –in the most profitable manner

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Illustrasjon: Statoil

Fundamental principles for the petroleum management

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• Access to exploration acreage through awards in licensing rounds:

• Numbered rounds

• Frontier areas

• Every other year

• Awards in Pre-defined Areas (APA):

• Annual awards

• Mature areas with infrastructure and exploration history

Our “playground” is NCS

npd.no

The Norwegian Petroleum Directorate (NPD)Various roles

7

Involvement of the authorities in every stage of activities

Exploration Discovery Field

AwardsImplemen-

tationphase

Production

INITIAL PERIOD4-10 YEARS

EXTENSION PERIOD20-30 (50) years

Concept studies

Cessa-tion

LIC

ENSI

NG

RO

UN

D

OP

ENIN

G

OF

NEW

A

CR

EAG

E

Develop-mentplan

DG3

DG2

DG1

Exploration drilling and delineation

Seismic acquisition

BOK BOV PUD

Annual production licence

Cessa-tionplan

Con-sent

Authorities

Produc-tion

licences

Drilling permit

Applic-ation

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National Shelf Library

Core sample storage with viewing room and laboratory

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132 895 meters of cores

639 631+ bags of samples

Oil from 634 exploration wells stored at -24 0C

Fact’s about Norwegian Continental Shelf

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Status for NCS 2017

• 84 fields in production

• 4 new fields started production

• High oil & gas production as of 2016

• 11 fields under development

• 6 plans for development (PDO)

• 23 exploration wells

• 10 discoveries

• 56 new licenses in TFO 2016

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Her kommer Aasta Hansteen på verdas største tunglasteskip på vei til

Høylandsbygd i Kvinnherad.

Kilde: Sysla

Resource estimates

More than half remains

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«Oljekontor» in the 1978 first resource outlook on NCS

04.10.201714

Resource outlook still NPDs important task today

04.10.201715

0

1

2

3

4

5

0

50

100

150

200

250

300

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Mill

ion

bar

rels

o.e

. per

day

Mill

ion

Sm

³ o

.e.

per

yea

r

Gas (40 MJ)

NGL

Condensate

Oil

Stable high production over next five years

16

OUTLOOK

RESOURCES ON THE NCS

Total 14.2 billion Scm o.e.

Remaining52%

Produced48%

21% reserves6% resources in fields5% resources in discoveries20% undiscovered resources

Who owns these resources?

Resource Accounts 2017More than half remains to be recovered

The State owns the resources on NCS

• May 1963:

• The Government proclaimed Norway’s sovereignty over the Norwegian continental shelf – and the petroleum resources belong to the Norwegian people

• Continental Shelf Act 1963:

• The State is the landowner and only the King (Government) can grant licences for exploration and production

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NPD’s Resource EstimateSignificant increase since 1990

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Proven resources

What does it take?

20

UNLOCKING THE REMAINING VALUE

3

Cost reduction and efficiency gains

4

Improved technical solutions

2

Invest for thelong term

Ekofisk sculpture

1Exploration

Significant reduction in exploration activity

UNLOCKING THE REMAINING VALUE - EXPLORATION

0

10

20

30

40

50

60

70

0

5

10

15

20

25

30

35

40

45

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Nu

mb

er o

f ex

plo

rati

on

wel

ls

Bill

ion

20

16

-NO

K

Exploration costs (companies)

Exploration costs (license and unit)

The Shelf 2015

Number of exploration wells

Refuelling is needed to maintain production

UNLOCKING THE REMAINING VALUE - EXPLORATION

77 Discoveries in the PortfolioGreat opportunities

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What does it take?

24

UNLOCKING THE REMAINING VALUE

3

Cost reduction and efficiency gains

4

Improved technical solutions

1

Exploration

Ekofisk sculpture

2Invest for the long term

Oil Resources in FieldsLarge remaining volumes

25

RESERVES

9 %

REMAINING

53 %

SOLD

38 %

Investments increase from 2019

26

0

20

40

60

80

100

120

140

160

180

200

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Bill

ion

20

16

-NO

K

Discoveries

Ongoing field developments

Fields in production (2013-2016)

Fields in production before 2013

The Shelf 2015

OUTLOOK

New wells must be drilled to increase recovery

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UNLOCKING THE REMAINING VALUE – INVEST FOR THE LONG TERM

Source: Statoil

Even More to Gain

Requires know-how and new technology

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• Tight Reservoirs• Enhanced Oil Recovery

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Tight ReservoirsLarge oil and gas deposits

Illustrasjon: Fishbone

Utilize new technology for profitable development

Toolbox for improved recovery in the production phase

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Multilateral wellsAdvanced geo-management

WAG injection

DIACS Inflow control devices

EOR

Infill wells

Optimised water injection strategy

Exploration Development Production Cessation

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New TechnologyAre we too busy to try out new technology?

Enhanced Oil RecoveryRecovery Factor (RF)

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Pore scale displacement

(Microscopic sweep)

Reservoir scale

displacement

(Macroscopic sweep)

Drainage Cutoff

RF = Rm x Rv x Rd x Rt

EOR focus IOR focus

Polymer InjectionAn opportunity for Johan Sverdrup

Source: Statoil

Injection

Production

Water breakthroug

h

Oil

Oil

Water

Water

Water

Water

What does it take?

34

UNLOCKING THE REMAINING VALUE

2

Invest for the long term

4

Improved technical solutions

1

Exploration

Ekofisk sculpture

3Cost reduction and efficiency gains

0

50

100

150

200

250

Autumn 2014 Autumn 2015 Autumn 2016

Bill

ion

20

16

-NO

K

Development- and operating costs are slashed

UNLOCKING THE REMAINING VALUE – COST REDUCTIONS AND EFFICIENCY GAINS

36

Increased drilling efficiency – reduced costs

UNLOCKING THE REMAINING VALUE – COST REDUCTIONS AND EFFICIENCY GAINS

Average cost for development wells

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Cost Control Skru på langlysene

Project

Technology

Knowledge

0

50

100

150

200

250

Høst 2014 Høst 2015 Høst 2016

Mill

iard

er 2

01

6-N

OK

Investment (7developments)

What does it take?

38

UNLOCKING THE REMAINING VALUE

2

Invest for the long term

3

Cost reduction and efficiency gains

1

Exploration

Ekofisk sculpture

4Improved technical solutions

Oil Resources in FieldsLarge remaining volumes

39

RESERVES

9 %

REMAINING

53 %

SOLD

38 %

40

Foto: Statoil/Øyvind Hagen

New technologies to improve recovery

UNLOCKING THE REMAINING VALUE – IMPROVED TECHNICAL SOLUTIONS

Ormen Lange

Åsgard compressionFoto: Statoil

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Develop, Qualify and Implement new technologyNeed for more full scale field tests

Olje- og energidepartementet

OG21

Forskningsrådet

Petromaks 2 DEMO 2000 Petrosenter

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Area solutionsEffective use of the existing infrastructure

Bilde: Aker Solutions

www.npd.no

Read the Resource Report 2017 on

http://ressursrapport2017.npd.no/en/

We do not a paper work only!

44Photo A. Deryabin

45 45 Questions?