Norwegian state-owned Statoil, with one eye focused on unconventional onshore plays like the liquids-rich Bakken and Eagle Ford, and the other eye glued on finding and developing large offshore fields, is on track to more than triple its North American oil and gas production by 2020, the company said.
And anyone wondering about the level of investment commitment required to attain just a portion of this lofty goal need only look at the events of June 20, when Statoil discussed its future plans and ambitions with investors in New York City. On the same day, in New Orleans, Statoil doled out a staggering $333 million for just 26 exploration blocks in Central Gulf of Mexico Lease Sale 216/222. That was the second highest total sum behind Shell’s $407 million for 24 blocks.
Moreover, and included in Statoil’s $333 million in total high bids, was a $157 million bid for just one tract, Mississippi Canyon Block 718. Not only was this the highest successful single bid in the entire sale, it was the highest single bid submitted in any previous sale, according to federal regulators.
“This addition of leases allows us to further build upon our broad-based strategy for exploration in the Gulf of Mexico and further upgrades our core position in this prolific and proven basin,” said Erik Finnstrom, Statoil’s senior vice president of exploration in North America.
In the last decade, Statoil’s North American portfolio had a compound annual growth rate, or CAGR, of more than 20 percent and the company projects a strong growth rate also going forward. Average production from U.S. and Canadian fields in the first quarter 2012 was 149,000 barrels of oil equivalent per day, up as much as 75 percent compared to the corresponding quarter in 2011.
“We are on track to reach our ambition of producing above 500,000 boe per day in 2020,” said Executive Vice President Bill Maloney, head of Statoil’s business area for development and production in North America.
Resource base in North America 6B boe-plus
Maloney told investors that the company’s resource base in North America has grown well above 6 billion boe, representing around 30 percent of Statoil’s total resource base.
He noted that startup of the Statoil-operated Leismer project in Canada and continued ramp-up of production in U.S. shales and tight oil plays, such as the Bakken and Eagle Ford, were key components behind Statoil’s recent production growth. The company now has production from more than 1,000 wells and holds more than 1 million net acres in three of the best U.S. plays, Maloney said.
Statoil’s $4.4 billion acquisition of Austin, Texas-based Brigham Exploration announced in October is expected to provide Statoil with a major onshore growth platform in the Bakken and Three Forks plays of Montana and North Dakota. The acquisition included an estimated resource base of 300 million to 500 million boe in this region. And production was expected to increase from an initial equity position of 21,000 boe per day up to 60,000 to 100,000 boe per day over a five-year period. The company averaged about 26,000 boe per day during the 2012 first quarter.
Statoil has built approximately 500 miles of oil and gas gathering lines in the Bakken, with 200 more miles under construction this year, and taken a position on the Enbridge pipeline to ship its crude to Guernsey, Wyo. From Wyoming, the crude will be delivered by rail to the U.S. Gulf Coast refining hub.
‘First class’ Bakken assets
“The acquisition of Brigham Exploration last year has provided us with first class tight oil assets in North Dakota and Montana and valuable organizational capacity,” Maloney said. “The integration process is progressing well and according to plan. In parallel, we are moving forward on the development of an operational organization in Houston for our Eagle Ford operatorship, commencing early 2013.”
Statoil’s expansion in the Bakken and in other liquids plays comes at the expense of its natural gas position in the Marcellus shale, as low natural gas prices negatively impact profits.
The company is currently operating about 20 rigs in the Marcellus, compared to 36 rigs in December 2011.
“We continue to bring on more wells (in the Marcellus) but we don’t produce them to the capacity they have,” Maloney said. “We’ve brought the rig count down and we’ve taken some of that (capital) and put it in the Bakken.”
Several offshore projects planned
Offshore, Statoil has equity in several major development projects that are planned to come on stream this decade, like Jack-St. Malo, Big Foot and Julia in the U.S. Gulf of Mexico and Hebron offshore Newfoundland and Labrador in Canada. Onshore Canada, Statoil is progressing its plans for the Leismer Expansion and Corner projects.
In the U.S. Gulf of Mexico, Statoil last year made a discovery in a Paleogene prospect called Logan in Walker Ridge. There are significant quantities of oil in place. However, the recovery potential is uncertain. Evaluation is ongoing, and an appraisal well will be drilled in 2013.
“Our ambition is to apply technology and experience from the Norwegian Continental Shelf to the deeper and more complex reservoirs in the Gulf of Mexico,” Maloney said, noting that over several years, Statoil has worked on a technology program called “Crack the Paleogene.” He added: “We hope elements from this technology tool kit will help us profitably develop the Logan discovery.”
Offshore Canada, activity is also aimed at maturing Statoil-operated developments. Recoverable volumes from the company’s Mizzen discovery in the Flemish Pass are now estimated at 100-200 million barrels, the company said. In 2012-13, the company plans to drill two to three exploration wells in nearby acreage, to determine the resource potential in the Flemish Pass basin.
In the Gulf of Mexico, Statoil has a 2012-13 exploration program comprising 11 wells, six operated by Statoil and five operated by partners.
