Statoil plans to step up exploration after driving down costs

By Mikael Holter on 11/16/2017

OSLO (Bloomberg) -- Statoil ASA plans to step up drilling in Norway for a second consecutive year, in the first indication it has given of its exploration plans for 2018.

Statoil is looking at 25 to 30 exploration wells in Norway next year, both as operator and partner, Atle Reinseth, V.P. for tie-back & brownfield projects at Statoil, said at a conference in Stavanger on Wednesday. The figure represents an early “frame” that will depend on factors such as partner approval and rig allocation and the actual level may be either higher or lower, spokesman Morten Eek added in an email.

While still an early estimate, it suggests Statoil could end up drilling as many wells off Norway in 2018 as it participated in globally in 2017. Norway’s state-controlled oil behemoth plans about 30 wells this year, with more than half in its home country. That suggests that it may also drill more wells globally next year.

This pick up will build on a recovery this year, after drilling hit a low of just 23 wells in 2016. Oil companies have slashed spending after crude prices collapsed in 2014, cutting exploration budgets to the bone. The austerity cure has produced efficiency gains, which coupled with lower prices from suppliers, have made drilling the cheapest it has been in many years.

Statoil expects to spend about $1.3 billion on exploration in 2017, down from $1.5 billion last year.

Barents Sea

The producer made a comeback in Norway’s Barents Sea this year with five wells as operator. While that campaign yielded disappointing results, it plans the same number of wells in 2018, Eek said. Statoil will also participate as a partner on one well drilled by Aker BP ASA in the region, Reinseth said.

In Norway as a whole, exploration activity is set to at least remain stable next year, Bente Nyland, the head of the Norwegian Petroleum Directorate, said in an interview at the Norwegian Operators Conference. In the Barents Sea, which saw a record exploration campaign this year, activity will be similar to this year, she said.

Nyland said recently she was worried about exploration in the North Sea, the heard of Norway’s oil industry, dropping to an 11-year low this year. Early indications show that companies are likely to increase their efforts there next year, she said on Wednesday.

“It will be better, the way it looks now,” Nyland said. “It looks like the companies are seeing that they have to do more in the North Sea, especially with the infrastructure that’s there. If you are to get something out of it, you need to work fast.”

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