 Technology from Europe:
Norway/Finland
OLF leads industry effort to improve NCS activity
Per Terje Vold is director general of the Norwegian Oil Industry Association (OLF). OLF is a professional body and employer's association for 23 oil companies and 52 supply firms engaged in exploration and production of oil and gas on the Norwegian Continental Shelf.
Question: Mr. Vold, how would you describe OLF's role within the Norwegian upstream industry?
Answer: OLF leads the industry's joint effort for development of a progressive, competitive petroleum sector, with a good reputation and good connections with authorities, stakeholders and public opinion. Our goal is to be a unifying, efficient and effective organization. We are the industry's foremost advocate in matters that concern the entire sector. We want to make sure that the Norwegian Continental Shelf (NCS) is an attractive investment and activity area.
Our petroleum industry is the most important contributor to development of the Norwegian welfare state. Oil and gas activities account for 20% of value creation in Norway. In 2002, crude oil and natural gas exports amounted to nearly 45% of the country's total exports.
Q: What is your assessment of last year's E&P market for Norwegian operators and equipment/ service companies? Was OLF satisfied with the amount of upstream activity during 2003?
A: NCS oil production peaked in 2000. There were 15 wildcat wells drilled during 2003. According to the Norwegian Petroleum Directorate (NPD), 30 wildcats must be drilled yearly to achieve the NCS long-term development path. In 2003, overall activity for NCS suppliers was slightly higher than the year before, an increase primarily due to platform-based services.
We have produced and sold only slightly more than one-quarter of the estimated, total oil and gas resources on the NCS. About one-half of Norway's total petroleum resources are situated in discoveries that have not been approved for development, or in deposits that have not yet been discovered. This represents enormous values that could provide the foundation for a high, stable activity level for many years to come.
Q: What level of activity and business do you expect for 2004?
A: We expect that 20 to 25 wildcats will be drilled during 2004. This represents an increase in activity compared to last year. Several of the fields now being developed are relatively large and require considerable investment, such as Snøhvit and Ormen Lange. Investments for 2004 are expected to be slightly higher than last year, about NOK 67 billion (US$9.39 billion). Total investment in the petroleum sector has been more than NOK 40 billion (US$5.61 billion) per year since 1992. The peak was reached in 1998, when investments reached more than NOK 80 billion (US$11.22 billion).
Q: Is OLF participating in any industry initiatives and projects, either government-sponsored or association-sponsored, to improve Norway's E&P sector?
A: The single, most important project, or process I should say, is KON-KRAFT. In 2003, KON-KRAFT produced reports containing proposals for measures aimed at making the NCS more attractive. For example, there was a tax report, plus another report on the activity level. These reports were commissioned by KON-KRAFT through the Topplederforum, which is headed by the Minister of Oil and Energy (Einar Steensnæs). Topplederforum consists of representatives from the entire petroleum cluster. OLF is a key contributor to this work.
Q: Do you think the Norwegian government is doing enough to encourage E&P activity? What initiatives should officials sponsor?
A: It is essential that correct decisions are made now, to ensure that future NCS potential is realized in full. The most important action that the government can take is to reduce the special tax for new activities and offer new, attractive exploration acreage. The industry has proposed fiscal changes that will make it more profitable to increase exploration, while also making it more economical to extract oil and gas from smaller fields. It is similarly important that operators gain access to prospective acreage offshore northern Norway. There are some promising prospects in the northern Norwegian Sea that we have not been allowed to probe.
Q: What are some major field projects, either in the North Sea or other regions, that OLF member firms are involved in?
A: Ormen Lange and Snøhvit are two major field development projects on the NCS. Ormen Lange is in the Norwegian Sea, and preliminary estimates show that it is the second-largest gas discovery on the NCS, ever. The discovery well was drilled in 1997, and production is likely to start in two years' time.
The Snøhvit development comprises three fields – Snøhvit, Albatross and Askeladd. These lie in the Barents Sea, about 140 km (87 mi) northwest of Hammerfest in northern Norway. Snøhvit is a gas field that was discovered in 1984. Production is planned to start in 2006. It will be the first major NCS development without a surface installation. Instead, a subsea production system on the seabed will feed a land-based plant.
Both the subsea production system (located on the field) and pipeline transport will be monitored and controlled from a control room at Melkøya (an island). There, operators will be able to open and close valves on the seabed 140 km (87 mi) away, using signals transmitted along fiber-optic cables, and with high-voltage electrical and hydraulic power lines. The main technical challenges for the Snøhvit project are long-distance, multiphase transport and flow assurance.
This work has been conducted in co-operation with the fishing industry, to maintain coexistence on the shelf.
The deepwater Ormen Lange field development, off mid-Norway, is also breaking new technological frontiers. The 400-Bcm (14.1-Tcf) gas field will be developed as a subsea-to-shore field development. The water depth is around 100 m (328 ft), and the pipelines have to surpass a very rugged seabed terrain, as well as a very steep edge on the way to shore. Cutting-edge technology is implemented in every phase of the development.
Q: Are any of these technical capabilities important to new international projects?
A: The subsea-to-shore technology used in developments like Snøhvit and Ormen Lange is followed with interest in many parts of the world. A gas discovery like Shtockman, on the Russian side of the Barents Sea, is one of several fields that could utilize technological breakthroughs and development achieved at Snøhvit and Ormen Lange.
Q: Toward which international areas do you think that oil & gas company interest, and investment money, are moving?
A: The NCS is experiencing increased competition for the interest of oil companies. New areas that were previously unavailable have now been opened up to petroleum activities. The companies base their exploration drilling decisions on assessments that incorporate various types of risk and uncertainty. Anticipated discovery rate, discovery size and profitability are the most important criteria. The companies want to secure a return that offsets the costs and risk associated with overall exploration activity.
In recent years, several smaller oil companies have trod a path to Norway. They have special interest in exploiting mature areas, as well as tail-end production. This is positive, but we still need more E&P activity from the major companies. 
Per Terje Vold is director general of OLF, the Norwegian Oil Industry Association. He received a bachelor's degree, magna cum laude, in science subjects from the University of Oslo. He then earned a Master of Science and Business degree from the Norwegian School of Economics and Business Administration in Bergen, in 1972. Mr. Vold began his career in the Ministry of Industry in 1973, transferring to the Ministry of Petroleum and Energy in 1978. During his tenure there, he headed a division, was representative to OECD/IEA in Paris and served as deputy director general. In 1986, he became director of central staff at Norsk Olje a.s. Mr. Vold subsequently was managing director of Custos Finans Øst A/S. In 1988, a seven-year stint at insurance/ investment house Storebrand began, culminating in roles as CEO and director of UNI Storebrand Nye AS. He was director of Statoil's Methanol Business Area before becoming managing director at the Federation of Norwegian Process Industries in January 1998. He was appointed to his OLF position in January 2004. Mr. Vold has held a number of outside directorships and is currently a director at DNB NOR ASA.
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