The oil and gas year 2012 by Fasett AS

Norwegian Oil and Gas in brief The Norwegian Oil and Gas Association (formerly the Norwegian Oil Industry Association) is an interest and employer organisation for oil companies and suppliers involved in exploring for and producing petroleum on the Norwegian continental shelf (NCS). It represents 102 member companies. Norwegian Oil and Gas is a national association in the Confederation of Norwegian Enterprise (NHO). Over four decades, the oil and gas industry on the NCS has grown into a cornerstone of the Norwegian economy and provided the basis for developing Norway’s welfare state. Sixty per cent of the country’s petroleum resources still lie beneath the seabed, and 25 per cent remain to be discovered.

Combined with the potential for improved recovery from existing fields, this provides big opportunities for Norwegian society. Good resource management has a long history on the NCS and, providing the right conditions are put in place, the oil and gas industry will remain a solid foundation for Norway’s economy and social life.

Norwegian Oil and Gas represents in January 2013

50 52 oil and gas companies

supplier companies

Norwegian Oil and Gas’s work will be based on the following principles and values: ■ Respect for people, safety and the environment

■ The importance of profitability for the industry ■ The principle of free competition

■ A high ethical standard and awareness

of the industry’s social responsibility

Norwegian Oil and Gas works to make the NCS more attractive by ■ securing the best possible operating param-

eters and competitive terms for the industry

■ finding solutions which help to enhance

the efficiency and extend the economic life of fields and activities on the NCS ■ undertaking tasks and collective activities on behalf of the member companies.

35 000

workers altogether employed in its member companies

250 000

workers employed directly and directly in Norway’s oil and gas industry

New chapters The NCS is a fantastic oil and gas province in a world which needs increasing volumes of energy. One of the biggest challenges facing the global community is lifting millions of people out of poverty. That demands access to energy – a lot of it. And Norway has a lot to offer.

As one of the world’s cleanest producers of oil and gas, we occupy an important position in the global energy market. At a time when consumption of coal-fired power is expanding sharply, natural gas will play an ever more important role as an energy bearer – particularly because of its far lower greenhouse gas emissions. We currently meet around 30 per cent of gas consumption in a number of European countries, such as France, Germany and the UK. The EU is dependent on our gas to reach its climate targets. As an energy nation, we have many exciting opportunities. A number of important discoveries have been made in a short time – major projects are set to go. Thirteen new discoveries were made in 2012, including five in the North Sea, five in the Norwegian Sea and three in the Barents Sea. Forty-one exploration wells were completed. Exploration activity is expected to be higher over the next few years. That augurs well for the future.

Contents

Norwegian Oil and Gas in brief

Industry policy and level of activity

Leader: New chapters

Working life: Pay negotiations 2012

Profile: Hans Chr Rønnevik

Pay settlement: Sushi with Sande and Brækken

The Norwegian oil and gas industry also faces many challenges. On the one hand, oil production has almost halved in just over a decade. On the other, our industry has both expectations of meeting ambitious production targets and a mandate from the government to do so. The following are required to reach these goals: ■ we must explore where we already are ■ we must improve recovery from existing fields ■ promising exploration acreage must be opened for oil and gas operations. The first two of these points are high on the agenda for our industry. We will seek to remind national decision-makers about the third as often as we can.

Norway is now entering a period with a big increase in petroleum investment and activity. We have an oil sector and a supplies industry with a high level of expertise and capacity to deliver what is needed to continue developing the NCS. Our oil and gas saga is far from finished. The outline is clear – we are ready to write new chapters. Gro Brækken Director general, Norwegian Oil and Gas

HSE: Success stories are no reason to relax

The environment: Big spending on marine

18 20

The environment: Every single drop is needed environment studies

Recruitment: Youngsters and education Key figures

Industry policy and level of activity

Vigorous activity and bright prospects

Optimism in the industry has been maintained by several big discoveries and a high and stable level of activity. But 2013 will be decisive. Over 40 years of activity on the NCS have established the petroleum sector as Norway’s most important industry. Oil revenues provide more than one krone in every four received by the government, and this activity generates substantial spin-offs for Norwegian society. Norway’s petroleum resources have not least laid the basis for a high-tech, internationally competitive industry which supports almost 250 000 jobs directly and indirectly. In addition comes substantial activity driven by government use of oil revenues. It is due to spend almost NOK 124 billion from the pension fund – global in 2013, representing almost one krone in every eight appropriated in the 2013 budget. Very favourably placed. Norwegian petro-

leum activity has been rising in recent years, helping the national economy to maintain persistently strong progress at a time when developments in the country’s trading partners have been characterised by debt and budgetary problems, economic recession and sharp rises in unemployment. At the same time, contracting markets have become a growing problem for Norway’s traditional export industries. On that basis, many people expressed concern during 2012 over what has been described as an increasing bifurcation of Norway’s economy and over the contribution made by high petroleum investment and a distinctive Norwegian level of costs to putting pressure on traditional industrial sectors. But this picture is too blackand-white in a complex discussion. The problems affecting Norway’s traditional export industries have primarily been created by recession and contracting markets in the rest of Europe.

The oil and gas year 2012

When some people also use these conditions to argue against opening new areas for exploration by the industry, they reveal a lack of understanding of a business which is long-term by its very nature.

Good years, but declining production demands action. Twenty-two new discoveries

were made in 2011, and the overall volume found exceeded annual production from the NCS for the first time since Ormen Lange was discovered in 1997. Norway also had a relatively good exploration year in 2012, with 13 discoveries – five in the North Sea, five in the Norwegian Sea and three in the Barents Sea. A marked increase in exploration activity from the middle of the previous decade must be seen as an important reason for the positive finding trend. Fifty-four exploration wells were completed on the NCS in 2011 and 41 during 2012. However, Norwegian oil output has declined by almost 50 per cent since 2000, with gas production rising substantially over the same period. Production is expected to remain more or less flat over the next few years. Four factors are crucial if Norway’s petroleum output is to be maintained and its supplies industry retained and further developed beyond 2020: improved recovery from existing fields, development of commercial discoveries, finding more in open areas and opening new exploration acreage. Heading north. Among the most promising

areas of the NCS still closed to petroleum operations are the waters off Lofoten, Vesterålen and Senja. They have a known geology and new seismic data, and lie close to existing infrastructure. Operations in these areas would ensure a stable level of activity for oil companies and suppliers into the next decade, and contribute to industrial development both locally and regionally. If opening the areas is approved and commercial discoveries are

made, the level of activity could quickly rise. Small finds may also be commercial in these waters. The results of the knowledge acquisition (KI) process on the impact of petroleum activities in the north-eastern Norwegian Sea show that neither environmental nor safety reasons exist for refusing to open the whole region to such operations. Norwegian Oil and Gas is therefore calling for an environmental impact assessment covering the unopened areas of Nordland 6 and 7 and Troms 2 to be initiated after the 2013 general election, and for petroleum activity to start in the parts of Nordland 6 which are already opened.

The environmental impact assessment currently under way with a view to starting petroleum activities in the former area of disputed claims in the Barents Sea (Barents Sea South-East) is gratifying. However, this is a new area where the industry does not yet know as much about the resource base or geology it does on the rest of the NCS. These waters are far from land, markets and infrastructure. Experience shows that the time from opening such an area until production can begin is 15 years. In practice, that could mean a start to production around 2030 at the earliest. World leader in the supplies sector.

Experience, knowledge and technology developed on the NCS have provided the basis for one of the world’s leading industries supplying the oil and gas sector. It is Norway’s largest mainland industry, with companies spread nationwide and a turnover above NOK 360 billion in 2011. Almost half these sales – NOK 152 million – came from abroad, making this Norway’s largest export sector after petroleum. The industry rests on decades of maritime expertise and accounts today for technology deliveries to such varied areas as renewable energy and medical equipment. ■

Current and future field developments* on the NCS (selected)

Skrugard / havis (2018)

* A plan for development and operation (PDO) has not been submitted / approved for all these fields.

goliat (2014)

hammerfest

tromsĂ¸

harstad

Aasta Hansteen (2016) zidane (2017)

linnorm (2016)

trondheim

valemon (2014)

martin linge (2016)

ivar aasen (2016) gudrun (2014)

bergen

oslo

stavanger

edvard grieg (2015)

johan sverdrup (2018)

The oil and gas year 2012

Working life

Pay negotiations 2012

A summer of conflict After a number of years without strikes, the NCS experienced two a few days apart during the summer of 2012. A demand for pension provisions to be incorporated in pay deals made agreement impossible in the offshore talks, and sparked a 16-day stoppage. The negotiating season began with a conflict in Baker Hughes which ranked as the first strike on the NCS since 2006. This week-long dispute affected several operators and ended a few days before mediation on the offshore pay agreements began. When the strike was over, Norwegian Oil and Gas signed a new pay deal with the Norwegian Union of Energy Workers (Safe) for the oil service area. Industry Energy was previously the only union which had an agreement with Norwegian Oil and Gas for employees in oil service companies.

Union cooperation. Two-year main settlements for four pay agreements were up for negotiation in 2012. For the first time in 10 years, Industry Energy and Safe cooperated in these talks. The Norwegian Organisation of Managers and Executives pursued its own demands. An early settlement was reached for the land base agreement. When the offshore negotiations were referred to the National Mediator, however, both land base and oil service deals were postponed to await the outcome of the mediation. Pension demand. Following a reform

approved by the Storting (parliament) in 2011, most Norwegian companies have amended their pension schemes. A key principle of the reform is that it must pay to work longer. Employees subject to the offshore agreements

The oil and gas year 2012

generally have a retirement age of 65. They are all covered by the AFP early retirement plan, which allows them to retire at 62 if they wish. Should they choose to work until they are 65, however, it must pay them to do so. The unions did not agree with that principle in this year’s negotiations. They wanted to incorporate the right to a full pension at 62 in the pay agreement, a demand which Norwegian Oil and Gas felt would reward competent and important personnel for leaving the workforce. The unions have been trying to get pension rights included in these agreements since 1980. Norwegian Oil and Gas takes the view that agreeing to this demand is even less relevant after the pension reform. Neither side was prepared to give way and, after the National Mediator failed to come up with an acceptable solution, the unions opted to take a number of their members out on strike.

Lockout notice. The strikers worked for

Statoil, ESS and BP. When they had been out for 12 days, and the two sides had attended the National Mediator several times to consider various resolutions to the conflict, Norwegian Oil and Gas saw no other option than to give notice of a lockout. The 32-year-old pension demand was unreasonable and impossible to

Temporary agency workers The EU’s much-discussed temporary and agency workers directive came into force in Norway on 1 January 2013. Its purpose is to protect temporary personnel by giving them the same terms as permanent employees. Temporary agencies will also be recognised as employers. This will pose challenges for many

concede, the companies and Norwegian society were losing more than NOK 200 million per day, and Norway’s reputation as a stable energy supplier to Europe was becoming tarnished.

Notice criticised. Although a lockout is the only instrument available to an employer in a labour dispute, the notice attracted criticism from several quarters. This strike had cost the community NOK 3 billion over 16 days, and a number of the parties involved had been badly affected. The criticism, not least from the government, therefore highlighted the need to discuss a modernisation of rules and instruments for labour disputes. Compulsory arbitration. As expected, the National Wages Board excluded the pension issue from the pay settlement. But Safe and Industry Energy secured partial acceptance of their demand that apprenticeships should count towards job seniority. This is regrettable from Norwegian Oil and Gas’ perspective, since its practical effect is to increase starting pay for offshore personnel. The unions had won acceptance for this demand in their pay deal for land-based industry earlier in the negotiating season. Such a provision is more appropriate there, since mainland industry faces greater recruitment challenges. ■

industries in Norway. Using temporary workers may be essential in certain cases to safeguard company flexibility. A number of players in the supplies industry are more affected by economic fluctuations than others. Extra personnel are needed at times to complete demanding projects. The new directive means that the final bill could quickly become very high. That may be critical for companies which operate with narrow margins.

Read more: Sushi with Sande and Brækken

The oil and gas year 2012

Pay settlement

Sushi with Sande and Brækken Leif Sande, leader of the Industry Energy union, and Gro Brækken, director general of Norwegian Oil and Gas, are doomed to disagree. But they were more at odds than usual in the summer of 2012, when a strike led to a lockout and compulsory arbitration. Yet they still need to talk together another day. Over dinner in a quiet corner of an Oslo restaurant, the pair agree that sushi is tasty. They have a difficult pay settlement behind them, but now give each other good advice on how to manage their chopsticks. That is not an easy business, either.

Their meal is heavy with symbolism. The food comes from a common dish, the chopsticks from the same piece of wood. They both have a responsibility for ensuring that the riches from the NCS benefit the whole community. No other industry comes close to creating similar value for Norwegian society.

Nor was it easy when Sande’s members downed tools for 16 days last summer, when Brækken gave notice of a lockout and when the government put its foot down and intervened with compulsory arbitration. In retrospect, it can be said that a different settlement was unlikely to have been reached in 2012.

“The grief was unleashed by the pension issue in Statoil,” comments Sande.

“I hear what you say, but I refuse to comment on it,” responds Brækken. “Pension issues are not part of the pay agreement. They must be put in a broader social context, where we can’t ignore the 2011 reform. When pensions became part of the 2012 negotiations, we had to define this as a classic yes-or-no question. We had no room for concessions. That’s why our members were prepared to institute a lockout.” “The Norwegian Confederation of Trade Unions (LO) and the Confederation of Vocational Unions (YS) weren’t as involved in the 2011

pension reform as the employer side, and we’d never have initiated a conflict if we’d been in the smallest doubt about that,” says Sande.

“Our demand was to reallocate some of the money the unions have in the bank as insurance for those who lose their health certificate. In our view, these funds could also meet our pension demands. And we also feel that this issue involves breaches of earlier promises.” It became a heated and emotional summer.

“Feelings and rhetoric were involved, which is what happens in conflicts,” Sande observes. Background

Two of the key players in the 2012 pay settlement meet on neutral ground to enjoy sushi. Will they succeed in eating from the same dish, or start fencing with their chopsticks?

The oil and gas year 2012

Sushi with Sande and Brækken The two opponents are sitting on the same side of the table for once, and even give each other good advice on the best bits of sushi.

“When emotions are unleashed during a conflict, our strengths sometimes become our weaknesses. But people don’t work more hours offshore than on land to achieve a very good income.”

“Try this one, Leif,” urges Brækken.

“Yes, yes ... not bad at all,” agrees Sande.

Darkness outside and the first Christmas lights indicate that Advent is looming in one of the world’s best and richest countries.

The interviewer has the advantage of sitting on the other side of the table, with the freedom to put questions: “Your members aren’t exactly badly off, Leif, and not many nursing assistants and pre-school teachers backed your fight with the oil companies?”

“I’ve never said that we’re badly paid, nor am I dissatisfied with the financial settlement,” replies Sande. “But our rates of pay have lagged behind the rest of society over the past 10 years, while the work rotation is the same as in mainland industry. And we don’t like to be provoked over this. Last summer’s conflict was about principles – pension terms for a group of people with a distinctive workplace and working conditions. I’d make two observations about the dispute: the unity in our ranks has never been stronger, but our reputation with the general public has been weakened. I blame the employers for that. The way we’re portrayed creates an impression that we’re a bunch of idlers. I actually think that being depicted in this way was the worst aspect.” COOLING DOWN: Last summer’s pay discussion became very heated at times.

“I understand what you’re saying,” says Brækken. “My message is that we have 250 000 highly qualified people in the Norwegian oil and gas industry. It’s never been our intention to give a false impression of their qualifications and commitment. We both agree on the great importance of the petroleum sector to Norwegian society.” She emphasises the long-term aspect – predictability and secure jobs. High costs are a matter of concern. In that context, she points to the report from the government’s rig commission, which the unions opted to leave. Finding solutions which cut costs and increase availability in the rig market is difficult. “Norway is a high-cost country,” says Sande. “Everything’s expensive here. The oil industry’s also part of that. We’re concerned to maintain high pay rates.”

“And more conflict, perhaps,” Brækken interjects. In the heated debate over the pay settlement, she objected to Sande’s claim that offshore workers were being exploited.

The oil and gas year 2012

“I said ‘exploited’ when we were confronted with claims that our members earn NOK 1 million a year,” he responds. “You’d have to work quite a lot of overtime to achieve that.

We’re a high-cost country, and we have an industry which can cope with high pay.”

Both he and Brækken agree that they must respect each other’s roles. “When emotions are unleashed during a conflict, our strengths sometimes become our weaknesses. But people don’t work more hours offshore than on land to achieve a very good income,” says Brækken. Dialogue is and will remain essential.

“It’s obviously important to have an employer’s association as well, or the world of work would become chaotic,” Sande acknowledges. Both are concerned about recruitment and ensuring that the industry attracts good specialists. Brækken adds that able people will always be in demand, inside and outside the petroleum sector.

“So it’s important that this industry isn’t only portrayed as involved in pollution and grief,” she says. “We often hear negative stories about what happens offshore, and have a reputational challenge. We must never forget that we’re talking here about a proper industry of great value both for those who work in it and for the nation.” ■

Pay settlement

leif Sande

gro brĂŚkken

Leader of the Industry Energy union since its foundation in 2006. He was previously leader and deputy leader of the Norwegian Oil and Petrochemical Workers Union (Nopef) and has held a number of posts in the union movement.

Director general of the Norwegian Oil and Gas Association since January 2010. She has long experience from the energy sector, but has also worked in the banking and finance sector. Norwegian secretary general of Save the Children in 1999-2009.

The oil and gas year 2012

profile

Hans Chr Rønnevik – Lundin’s exploration head

Genius with a stubborn streak

“You don’t need to be a large company to make big discoveries. Size is more important when these finds come to be developed.”

Hans Chr Rønnevik talks with philosophical enthusiasm about the route to Norway’s new generation of oil and gas fields – to a great extent, surprises are the result of challenging established verities. On the other hand, the new fields discovered have been given old Norwegian names such as Johan Sverdrup, Edvard Grieg and Alvheim. Where the company structure on the NCS is concerned, he says: “Diversity is more important than size.” He works in a small company with a high level of activity, sub-surface understanding, accuracy and success.

Formula. Oilman J Paul Getty coined a formula

for success – rise early, work hard, strike oil. Rønnevik usually starts work at 05.00, and devotes several morning hours to doing his own data interpretation before getting down to the many jobs which fall to a man in his position – and often returning to interpretation for

several hours in the afternoon. That allows him not only to find the oil/water contact – crucial for mapping a reservoir – but also to keep his feet on the ground. Hailing from Haugesund north of Stavanger, Rønnevik is a pragmatic fellow. And he serves as an example of the old adage “Cobbler, stick to your last”.

He was born in 1945 and could for all intents and purposes have retired, taking walks in the woods around Oslo where he lives, fishing at his holiday cabin in Austrheim near Bergen or playing golf at his Spanish getaway home.

“The meaning of life is to live,” he says. And work remains central to his being.

When Rønnevik became a science undergraduate in 1964 at the University of Bergen – which he still describes as “Lenin Heights” – he concentrated on mathematics, chemistry and geology. “We lived in the shadow of the statement from the Norwegian Geological Survey in 1958 that no oil was likely to be found on the NCS,” he recalls. “Some of us still became geologists.” It was first in 1968, with the Cod discovery, that the veil began to be lifted from these waters.

Then came Ekofisk, and a small nation sailed into a big oil age.

After graduating in 1971, Rønnevik worked as a scientific assistant at the University of Bergen until he was recruited by the Ministry of Industry on 1 September 1972. He became a member of the pioneering generation in the ministry’s oil office, a few months after the Storting had voted to create the Norwegian Petroleum Directorate (NPD) and Statoil. The idea was that the bulk of the oil office staff would transfer to these new state entities, and Rønnevik went to the NPD. He remained there for 10 years, spent a short time with Shell and moved to Saga Petroleum, the private Norwegian oil company, where he stayed until the end in 1999. Saga was swallowed up by Hydro and Statoil, marking the start to a process which led to a merger between Statoil and Hydro’s oil and energy division. HANS CHR RØNNEVIK Exploration head at Lundin. He has had a long career in Norway’s oil and gas industry, including service with the NPD, Shell and Saga Petroleum.

The oil and gas year 2012

Genius with a stubborn streak “Some of us became involved in the autumn of 1999 in a process which sprang out of our view that a new company would be required to supplement the big boys,” recalls Rønnevik. “We ended up with Berge Larsen in DNO.” He and a small core group left in 2004, and part of DNO’s portfolio was sold to Lundin. That became the beginning of a new slice of Norway’s oil adventure. “We’d resolved in DNO that we were going to make money from the word go,” he says. “When we started in Lundin, we committed to organic growth from the start. We were going to explore and find for ourselves. We drilled our first well in 2007 and made our first discovery that same year with Edvard Grieg.”

“We’ve so far found 859 million barrels of oil equivalent on the NCS, at a finding cost of less than USD 1 per barrel. That’s because we’ve secured acreage we believe in and where we have the capacity to do what we intend.” Lundin is now being acclaimed by the Norwegian government as the small company which – after Statoil – is up with the leaders for number of wells and continuous exploration on the NCS. Simple. Rønnevik’s concept is a simple one

– don’t believe everything you once learnt. He dares to turn his back on lessons learnt from books and lectures, and to challenge established verities.

“A close-knit and open environment where knowledge is shared and available to all,” he says, presenting his formula in a series of blunt points. “A united team with collective solutions. Rapid dissemination of information. Continuous dialogue and symposia. Projects up simultaneously in all phases. Less need for meetings. “It’s important to acknowledge what we know and don’t know,” he adds philosophically. And the results?

“We decided to participate in a revitalisation of the NCS,” Rønnevik explains. “We weren’t going to buy reserves, but find them. We wanted organic growth. Nor were we going to test to satisfy the stock market, but to boost our own understanding. We would build reserves and value. Looking back, we’ve had a breakthrough every third year. We’ve so far found 859 million barrels of oil equivalent on the NCS, at a finding cost of less than USD 1 per barrel. That’s because we’ve secured acreage we believe in and where we have the capacity to do what we intend.”

Experience. Lundin’s staff have a high average age of 50 years, which means that their experience age is also high at 25 years.

“Where does knowledge reside, in the companies or the people?” Rønnevik asks. He notes that the “old guys” in Lundin have experience from most of the companies, discoveries and projects on the NCS. One of Norway’s biggest errors was to assume that its offshore adventure had ended. In Rønnevik’s view, insufficient drilling simply created a temporary slowdown.

“We must have a culture which manages to accept risk,” he says. “I’m dubious about one-sided cost / benefit analyses, but we mustn’t waste money. I regard seismic data as a consumable rather than an end product. That’s why we have to drill, drill, drill.” ■

Expert eye: Rønnevik sees oil and gas where others only see lines and patterns. Devoting countless morning hours to detailed maps has made him an outstanding petroleum hunter. 14

The oil and gas year 2012

profile

KarlEdwin Manshaus on rønnevik

“We decided to participate in a revitalisation of the NCS. We weren’t going to buy reserves, but find them.”

Stubborn. “Rønnevik starts where Schlumberger and others leave off,” says Karl-Edwin Manshaus, former secretarygeneral at the Ministry of Petroleum and Energy and one of the most powerful men in Norway’s oil industry over many years. “He’s a stubborn mule who never gives way. “He’s one of Norway’s best geologists, who’s always been able to apply the latest technology in order to move boundaries. The commercial players haven’t always listened to him, but he’s never compromised or given up. He knows what he’s talking about, and he can do more than talk. He can find oil and gas.”

Farouk Al-Kasim on rønnevik

genius. “Hans is actually a genius,” declares geologist Farouk Al-Kasim, one of his colleagues in the industry ministry and the NPD’s first resource management director. “He’s not only a geologist – one of the very best – but also a thoughtful philosopher. It’s this combination which has made him what he is. I read recently in the literature on organisations that a distinction can be drawn between formal and actual leaders, and Hans belongs in the second category. I was his boss at the NPD, and saw that he had to be given space. He got that, but always repaid it with loyalty. He’s achieved a lot because he has the rare ability to combine geological intuition with intelligence and drive. I both respect and envy him.”

The oil and gas year 2012

HSE

Success stories are no reason to relax

The number of gas leaks on the NCS continued to decline in 2012. But that is no reason to slacken efforts to cut such incidents on Norwegian oil and gas facilities. Increasing risk awareness among offshore workers is one way of reducing the threat of major accidents even further from today’s low level.

Norway’s petroleum industry constantly devotes considerable resources to cutting personal injuries and long-term occupational health damage caused by the working environment. Both aspects are important, and the commitment will continue.

Success stories. The number of gas leaks on the NCS has dropped substantially since 2000. After flattening out in 2009-11, this fall continued over the past year. The positive picture documented in detail by the Petroleum Safety Authority Norway (PSA) in its RNNP report on trends in risk level in the petroleum activity has in no way encouraged the industry to slow down its safety efforts. Work in the hydrocarbon leak project shows that a purposeful commitment pays off. It also demonstrates that this effort must not be distracted by good results, but that the latter actually illustrate the importance of keeping the pressure up all the time. 16

The oil and gas year 2012

Experience transfer. Pursued by Norwegian

Oil and Gas, the project aims to help lower the risk of major accidents by cutting the number of hydrocarbon leaks on NCS installations. Its recommendations are made freely available. The principal activities in the project are analysing past leaks on the NCS in order to

identify their causes, contributing to experience transfer between the companies operating in these waters to ensure that everyone has the best possible information about ways of reducing such incidents, and exchanging experience with petroleum operations in other countries – particularly the UK.

Parameters. Stable and predictable operating

parameters are essential for safe and efficient operation. Norwegian Oil and Gas was represented during 2012 on the official rig commission.

Considerable resources were also devoted to the EU and the European Commission’s proposal for a new petroleum industry safety regulation. Norwegian Oil and Gas participates actively in the Regulatory Forum and other relevant arenas to help ensure that new legislation and regulations take account of the need for safe and acceptable operation and good resource utilisation. Standardisation is an important element in the performance-based regulatory regime. Norwegian Oil and Gas again accepted a leading role during 2012 on the sector board for petroleum standardisation at Standards Norway.

Well incidents and integrity. Activity and

“Pursued by Norwegian Oil and Gas, the project aims to help lower the risk of major accidents by cutting the number of hydrocarbon leaks on NCS installations. Its recommendations are made freely available.”

Deepwater Horizon follow-up. The Deepwater Horizon project at Norwegian Oil and Gas published its final report in June 2012. Preventing major accidents has been a top priority in the follow-up to this Mexico Gulf disaster by Norway’s petroleum industry. The report builds on a review of findings by the key investigations launched after the accident. It was compiled in close dialogue with government agencies and unions in order to ensure the broadest possible approach to and shared understanding of the issues.

The report presents 45 specific recommendations for making the industry even better at avoiding major accidents. In addition, the project has coordinated work at an international level – not least through the International Association of Oil & Gas Producers (OGP) and Oil and Gas UK. Long-term health effects. The noise

project launched in 2011 continued its work during 2012. Hearing damage has been highlighted in the RNNP reports as a challenge,

commitment in Norwegian Oil and Gas’ Drilling Managers Forum (DMF) and underlying networks make an important contribution to reducing the number of well incidents. A number of presentations have been produced, for example, to transfer experience from earlier incidents. These have been distributed to facilities on the NCS to help ensure a continued focus on prevention and that those involved with drilling and wells on a daily basis also learn from incidents elsewhere. The Well Integrity Forum (WFI) pursues active and constructive work on guidelines and on updating Norsok standard D-010. Norwegian Oil and Gas is also strongly represented in the OGP’s well expert committee in order to contribute to experience transfer and learning across national and company boundaries. Priorities for this body include a database of well incidents, well control equipment and reliability, expertise and standardisation. ■

and the project will play an important role in efforts to reduce long-term harm from noise exposure. Activities include identifying new technology to replace hand-held tools. Several seminars and breakfast meetings were held on the subject during the year, and support for these events was substantial.

Dropped objects. Dropped objects have the potential to harm both people and equipment. Over the past two years, a project at Norwegian Oil and Gas has worked to identify the reasons why objects are dropped. This has resulted in a freely available training package for the whole logistical chain in the petroleum industry.

The response and commitment among those working offshore and at the land bases were high throughout the project, and their suggestions have been important for the training package. A separate set of measures has also been created to help companies in their continuing efforts to prevent dropped objects. Everything is freely available in Norwegian only from norskoljeoggass.no / fallendegjenstander.

Focused: Despite very good HSE results in 2012, the top priority for Norwegian Oil and Gas remains to ensure that the industry works purposefully to avoid major accidents. The oil and gas year 2012

The environment

International Energy Agency

Every single drop is needed

Fatih Birol, chief economist at the IEA, has made it clear that the world requires every drop of Norwegian oil. At the same time, he emphasises that two-thirds of the world’s fossil fuel reserves must remain in the ground if the challenges related to carbon capture and storage (CCS) are not overcome.

The IEA published its World Energy Outlook for 2012 in November. This report was immediately seized upon – inaccurately – in Norway’s energy and climate debate as evidence that twothirds of the country’s oil and gas resources

cannot be produced because of global warming. However, Birol reacted quickly by emphasising that the world needed all the Norwegian oil it could get. Overall perspective. Oil, and not least

natural gas, are much more environmentfriendly than coal. So it is primarily the latter which must remain unused if the world is to succeed in limiting the global rise in temperature to 2°C by 2050, as recommended by the UN’s intergovernmental panel on climate change. Even within the 2°C limit, however, fossil fuel will contribute a significant proportion of the world’s energy supply in 2050 – natural gas must even strengthen its position.

But this is not how the world looks today. Among fossil fuels, coal consumption had the biggest increase in 2011 and in eight of the 10 past years. It accounted for 30.3 per cent of global energy supply in 2011, the highest proportion since 1969. In other words, coal consumption is moving in the wrong direction. The fossil fuel mix must change if the world community is to limit the rise in global temperature. Natural gas consumption must increase and coal decline. Operations on the NCS are accordingly important for ensuring that coal does not remain the fastest-growing fossil fuel. Moreover, the IEA’s message that two-thirds of world fossil reserves must remain in the ground assumes that CCS is not adopted on a large scale. This assumption could quickly be overturned, particularly given the pace of technological development in recent decades. The IEA also recommends a strong commitment to CCS.

Environment-friendly oil and gas producer. Norway’s petroleum industry

The oil and gas year 2012

leads the world for recovery factors. It also keeps carbon emissions per barrel of oil produced low. This is documented in the 2012 environmental report from Norwegian Oil and Gas. As the NCS matures and its petroleum fields are depleted, more energy is needed to bring the resources to the surface. Nevertheless, the oil and gas industry is delivering good climate results. Part of the reason is that this sector has implemented a number of emission-reducing measures over several decades. The result is an offshore business at the top of the international ranking for energy-efficient production and low carbon emissions per unit produced. The environmental report also shows that certain other oil provinces are starting to make clear improvements in emissions as they adopt operating patterns corresponding to those on the NCS – such as reduced flaring. ■

Valuable environmental project

Big spending on marine environment studies

Do offshore activities affect life in the sea over time and, if so, how? This was the principal starting point for a large-scale research commitment launched off Norway in 2002, which produced an interim report in 2012. Ten years, 65 projects, 110 publications and NOK 100 million have produced much new knowledge.

Part of the purpose of this Oceans and Coastal Areas programme, coordinated by the Research Council of Norway, has been to learn more about possible long-term effects of petroleum industry discharges to the sea. Its results are important for the oil companies in ensuring optimum protection of the marine environment. A repeated finding of the studies is that a possible impact on the environment is only likely in the immediate vicinity of a platform. The main conclusions on the most frequently discussed issues are outlined below. Produced water. Findings from laboratory

tests using high doses of and long exposure to water produced with oil and gas include disrupted sexual development and reproduction in fish and other marine organisms. However, the position is different in the sea itself. Results from investigations around platforms indicate that, while individuals may be affected, the impact on fish is local because the produced water rapidly becomes diluted. The conclusion is accordingly that produced water discharges on the NCS do not have negative effects on fish stocks.

Far north not more sensitive. The Barents

Sea is distinguished from waters further south on the NCS by lower temperatures, different light conditions and the presence of ice. Research results reveal small distinctions between Arctic and temperate marine organisms and communities in terms of sensitivity to oil-related pollution. The variations can cut both ways,

and there is no reason to expect that marine organisms in the Arctic are intrinsically more sensitive to petroleum industry discharges than those in other parts of the NCS.

Impact of drill cuttings. Environmental

studies conducted around NCS oil facilities over a number of years have demonstrated effects on the bottom fauna from the discharge of oily drill cuttings â&#x20AC;&#x201C; in some cases up to three-four kilometres from the platforms. Since such discharges ceased in 1993, the affected areas have been substantially reduced. Effects on fauna from old oily cuttings are seldom found more than 500 metres from a facility. Environmental monitoring has not identified any impact from water-based cuttings beyond 250 metres from the discharge point, and the normal limit is 50-100 metres. Studies have

shown reduced numbers of certain sensitive bottom dwellers, although no species disappears entirely. Monitoring of and tests with cold-water corals indicate that they are not particularly sensitive to discharged cuttings. That accords with the frequent discovery of such organisms on oil installations where various types of cuttings have been discharged over many years â&#x20AC;&#x201C; the corals grow and thrive on the platform legs.

The way ahead. More still needs to be learnt.

Does the impact of petroleum discharges on individuals affect populations and ecosystems, for example, and is this effect long-term? The research project on long-term effects of discharges from oil and gas operations runs to the end of 2015, and Norwegian Oil and Gas will support its work throughout that period. â&#x2013; The oil and gas year 2012

The oil and gas year 2012

Recruitment

Youngsters and education Selecting a course of study or a career is no easy business for a 15-year-old in Norway today. In the absence of advice and guidance from home or school, they are often influenced by hobbies or interests when making choices for their future. Young people in Norway are fortunate in actually being able to consider choosing on the basis of their personal interests. Nonetheless, society and relevant adults have a duty to inform them about the opportunities their decisions could open up and which doors they might close. Much has changed since a 15-yearold’s parents were at the same age. Norwegian Oil and Gas accordingly works closely with careers advisers in schools and tries to ensure that this important group is informed about developments in its industry and how it assesses future demand for expertise.

Giving away three years of education

In connection with its change of name to Norwegian Oil and Gas, the association launched an interactive game called Hunt the Deep in November 2012. The winner will receive the NOK 300 000 cost of a three-year BSc in a science or technology subject when the course is completed. Thousands of young players were registered in advanced, and eagerly competed in a game which provides increased knowledge about and understanding of processes in the petroleum industry, from exploration to production.

economics and administration, technology and health. It looks as if the warnings of an engineer shortage have been picked up by young people – engineering BSc courses saw a 25 per cent increase in applications from 2011, and the number accepted was up 14 per cent. Engineering MSc students rose by 5.8 per cent. That means about 6 700 youngsters started such BSc and MSc studies in 2012. At the same time, the annual company survey published by the Employment and Welfare Administration (NAV) last spring showed that Norway is short of 8 000 engineers and ICT specialists. So even a whole annual cohort of new graduates would not suffice to meet current requirements in this area. The shortage of engineers is also growing in step with investment on the NCS. So demand for such personnel will probably go on increasing. ■

With a multitude of opportunities at home and abroad, helping today’s youngsters to make wellconsidered choices is important. Norwegian Oil and Gas believes that the government should subject educational courses to a greater degree of means testing. Companies and public administration in Norway need a lot of engineers today and in the years to come, and the association accordingly wants systems which encourage young people to choose these subjects. Failing to do so could leave the country facing two problems: not enough engineers and unemployed youngsters.

Growing interest in science. A total of 93 475 qualified applicants were offered places on Norwegian courses in July 2012. The subjects with the biggest increases from 2011 were

Demand for engineers in Norway’s petroleum industry (left-hand axis) and investment on the NCS (nominal NOK bn) (right-hand axis) Companies in the oil and gas sector have recently been experiencing shortages of competent labour. Investment in the industry is also rising year by year. These two components are growing in step with each other.

Source: BCG analyse

+17 %

+1%

50 000 +18 %

40 000

+3%

30 000 21

2002

2003

47 40

200

30 23

2004

2005

100

20 000 10 000

Demand for engineers (left-hand axis)

2006

2007

Investment on the NCS (right-hand axis)

2008

2009

2010

2011

Annual percentage growth

The oil and gas year 2012

Key figures 2012 Norwegian continental shelf

Completed exploration wells on the NCS

Number

figure

figurE

Source: Norwegian Petroleum Directorate

Governmentâ&#x20AC;&#x2122;s net cash flow from the petroleum sector

NOK bn in 2013 value

500

450

Source: Ministry of Finance

400

350

300 40 250 30

200

100

0 1990

1992

1994

1996

1998

Appraisal wells

2002

2004

2006

2008

2010

2012

1975

Wildcats

1980

1985

1990

1995

Actual development

Petroleum production with trend for recent years

Million scm oe. Forecast from Facts 2012

figure

2000

2005

2010

2015

2020

2025

2030

Forecast, national planning budget 2013

Petroleum resources by maturity at 31 Dec 2012

Source: Norwegian Petroleum Directorate

300

Reserves 250

200

24 %

Undiscovered resources

19%

150

100

Produced

0 1970

1975

Oil

1985

Gas

1990

1995

2000

Condensate

2005

2010

2015

NGL

Resource growth and production on the NCS

Million scm oe

figure

1980

Source: Norwegian Petroleum Directorate

450

400

350

300

250

200

150

100

IN fields

APA rounds on the NCS Source: Ministry of Petroleum and Energy

Companies applying 50

0 1990

1992

1994

1996

1998

Resource growth

Resources

Blocks on offer

450

44 %

Resources IN discoveries

The oil and gas year 2012

2000

2002

2004

2006

Total petroleum production

2008

2010

2012

2003

2004

2005

2006

2007

APA full / part blocks on offer

2008

2009

2010

2011

2012

Companies applying (right-hand axis)

© Norwegian Oil and Gas Association 02-2013. Design: English translation: Rolf E Gooderham Photos: Emile Ashley (full-page photos: front cover and pages 7, 8, 12 and 20). Thomas Ekström (portraits pages 8 and 12, pages 10-11 and 14-15). Tomas Alf Larsen/ Norwegian Oil and Gas (page 16). Anne Lise Norheim/Norwegian Oil and Gas (page 17). Øyvind Hagen/Statoil (platform, page 17). Harald Pettersen/Statoil (page 18).

Historical development of direct carbon emissions (mill tonnes) and emissions by source in 2011

figure

Emissions to the air on the NCS compared with the international average

Mill tonnes

Sources: OGP and EnvironmentWeb

1.2

14.0

79.3%

10.5

Shown per 100 kg for CO2 and per kg for the others, per scm oe produced.

1.0

Turbines

All figures from 2010 because international data for 2011 were not available in February 2013.

0.8

10.9%

7.0

0.6

Flaring

8.4%

3.5

0.4

Motors

Well testing

0 01

Carbon emission (mill tonnes)

figure

0.9%

0.5%

0.2

Boilers

0.0

CO 2

Carbon emissions by source

NO x

CH 4

nmVOC

SO 2

NCS 2011

International average for oil producing countries in 2010 (offshore fields)

Historical development of chemical discharges

Tonnes 200 000

160 000

1 200

160 000

12 800

960

120 000

9 600

720

80 000

6 400

480

40 000

3 200

240

Green chemicals

Red chemicals

Discharge and injection of produced water (mill cu.m)

Mill cu.m

Black chemicals

Total number of acute oil discharges on the NCS and discharges larger than 50 litres

Number

200

25%

300

160

20%

240

120

15%

180

10%

120

0 97

Yellow chemicals

figure

Produced water to the sea

Injected water volume

Proportion injected of total

Number larger than 50l

Total number of oil discharges

The oil and gas year 2012

Norwegian Oil and Gas Association

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