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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

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What's Behind This Oil Major's Surprising Strategy Shift

offshore

Statoil will center its oil drilling efforts on its own backyard next year, in the waters offshore Norway. But unlike this year, the 2018’s exploration focus doesn’t involve looking for potential gigantic resources in frontier areas.

Instead, Norway’s oil major plans a drilling campaign that will explore areas close to existing infrastructure in order to maximize the value and potentially tie up even smaller discoveries to existing platforms.

Statoil will take part in the drilling of 25 to 30 wells offshore Norway in 2018, and some two dozen of those will be split between the North Sea and the Norwegian Sea, the more developed areas compared to, for example, the Barents Sea, according to the company’s exploration head Tim Dodson.

“It’s not really a year of big-impact prospects,” Dodson told Bloomberg in a recent interview.

“It’s more a year of value-creating, infrastructure-led exploration activity in Norway and the U.K.”

Earlier this month, a Statoil spokesman told Reuters that the company was looking at 25-30 wells off the Norwegian coasts, but the final plans depended on some approvals.

For 2017, Statoil planned to drill 30 exploration wells worldwide as operator and partner, expecting to complete 16-18 exploration wells on the Norwegian Continental Shelf (NCS), the company said at the beginning of this year. That was higher than the 14 wells it completed offshore Norway as operator and partner in 2016. Related: Oil Rig Count Rises After OPEC Deal Extension

Statoil will update the market on its exploration spending plans for the 2018 drilling campaign next February, but Dodson confirmed to Bloomberg that the company will nearly double efforts in the North Sea and Norwegian Sea to take advantage of the infrastructure that is already in place there.

“That infrastructure doesn’t get any younger, so it’s really about trying to hoover up and generate value. We can create a lot of value from these small discoveries,” Dodson told Bloomberg.

This approach to exploration is surely welcome news to the Norwegian Petroleum Directorate (NPD) and its director general Bente Nyland, who had voiced her concern over oil companies neglecting the powerhouse and the most mature area of the Norwegian oil industry: the North Sea. Without new oil discoveries, especially in mature areas with well-connected infrastructure, the decline in Norway’s oil production would be even bigger than expected, industry regulators. After 2025, oil production and drilling activity are expected to significantly drop off unless there are new discoveries, according to Statoil. Related: Who Will Win The Self-Driving Taxi Race?

This year, Statoil had high hopes for exploration success in the Barents Sea, where it drilled 5 wells. But as a whole the Barents Sea campaign was a disappointment for all operators, who aren’t giving up, vowing instead to return with more drilling next year.

Dodson told Bloomberg that the company would drill five or six wells in the Barents Sea next year, but it now has lower expectations, including for the Korpfjell license, which was considered the most promising wildcat this year, but yielded no oil. At Korpfjell, Statoil will drill a deeper well in 2018, Dodson said, but noted that its expectations were lower now.

Although Statoil isn’t giving up on the Barents Sea exploration, it’s stepping up efforts of ‘doing more with less’ by focusing on the North Sea and Norwegian Sea, where even small discoveries can be commercially and technically viable because of the infrastructure already installed in the fields there.

So it seems that the 2018 exploration campaign for Statoil will be more like playing on its home turf rather than moving into uncharted waters.

By Tsvetana Paraskova for Oilprice.com

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