Statoil’s CEO Eldar Sætre made the case for simplicity, industrialization, and standardization as a way for the industry to get through the current downturn at IHS CERAWeek in Houston Tuesday afternoon.
Sætre opened with a joke about the downturn saying, “Some people say that the secret to happiness is nothing more than good health and bad memory. There’s some truth in that, especially in the industry.”
He noted that the downturn is nothing new for the industry, and in Sætre’s 35-year career, he’s been through several. “With every downturn, there’s the cutting back measures,” he said. “These are the discussions happening in most board rooms, even my own. As an industry, we must do more than just hit the brakes. We need fundamental change.
“Simplification and industrialization, these words are not yet immediately associated with our industry.”
Sætre noted that the cost of subsea developments have increased by a factor of three, and he lays the blame with operators. “Every operator has tailor-made their own solutions for their seemingly unique challenges,” he told the crowd. “Standardization could be a game changer.” And Statoil has been working with its suppliers to achieve this ambition. The topic was a big one at the Underwater Technology Conference (UTC) in 2013, where Statoil was one of many companies discussing the need to make technology - from the smaller components to the larger systems - more uniform.
Sætre said while cost-cutting is a necessity, he cautioned austerity. Currently, systems, including resources, regulations, and specifications are very complex, he said. And the fixes have also become complex.
“Getting to simplicity is much harder,” he noted. “Getting to the core of what is really needed, cutting cost in fast track manner is easy. Cutting the right cost is much more difficult.”
Optimism on the NCS
IHS moderator Daniel Yergin asked Sætre about the future of the Norwegian Continental Shelf (NCS) following the fifth largest discovery there, Statoil’s Johan Sverdrup field. Sætre said he remained optimistic about future discoveries, noting that Statoil owed the Johan Sverdrup find to big data.
“People had ideas, they were persistent; didn’t give up,” he said. “The accumulation of data helped to build that knowledge base, to visualize and see what’s down there. That increased the probability of getting to the right place.”
Getting Arctic comfortable
Yergin also asked how Statoil regards the Arctic as a frontier area. Sætre said the Arctic has a huge geography and a lot of prospectivity, saying it needs to be broken up into areas that are workable.
“Statoil has a very good track record in the Barents Sea and East Coast Canada,” he said. “We have to be very comfortable. This is about technology, operational practices and cost. Cost challenges are increasing, and we have to work on the cost challenge.”
Sætre noted that to be able to operate in these harsh environments, you have to have a response plan ready. “Once you’re in the ice, you have long distances, long nights; it’s more complex. You need step-wise approach.”
Pathway to ending flaring by 2030
Sætre also took time during his presentation to discuss Statoil’s recent commitment to end routine flaring by 2030. “Our industry is still perceived as being part of the problem, not part of the solution,” he said. “Statoil acknowledges the consensus on human-produced climate change, and we agree on necessary action.”
He said that coal should be replaced globally with natural gas, and noted that both Asian and European countries should follow what the US has done already. Sætre also said he belives a price on carbon that stimulates the shift is needed. “In Norway, we have a high CO2 tax around US$65. This has helped us reduce emissions to less than half of global average.”
Sætre said that globally 140 Bcm of natural gas is flared, resulting in 300 million tons of CO2 being emitted. He said that Statoil has begun working with GE to utilize low carbon solutions including GE’s “CNG in a box” concept.
Ultimately, Sætre said that delivering at low cost and low carbon is a significant challenge. “It’s bigger than any one company can do on its own,” he said. “It has to be industry-wide. It’s about openness, about standards and performances. Engaging with stakeholders. It’s about responsibility, setting the standards ourselves. Let’s put our knowledge to work.”
Image: Statoil CEO Eldar Sætre at CERAWeek 2015/OE Staff.
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