Statoil sees Bright Future for Norwegian Gas: Interview
On the sidelines of last week's annual IHS Cera Week energy conference in Houston, Texas, NGE sat down with two executives from Statoil: Jens Okland, executive vice president of Statoil’s marketing, midstream & processing organization and previously senior vice president of Statoil’s North American natural gas portfolio; and Jan Rune Schopp, the current senior vice president for Statoil’s North America domestic unit.
In contrast to the grim mood of many of the conference, the two executives were refreshingly upbeat about the long-term outlook for the industry as a whole and natural gas in particular. One reason was the recent climate change agreement reached at COP21 in Paris last December. Okland expressed optimism that climate change can be addressed, and noted that the solution needs to balance the “triple bottom line of environmental, economic, and social needs.”
Statoil believes climate change strategies must incorporate the dual goals of alleviating energy poverty while reducing emissions. In Europe, replacing European coal-fired generation with natural gas is the most cost-effective way to reduce carbon emissions in the short term; but in the long-term, Statoil expects some price to be placed on carbon.
At the moment, Okland agrees, natural gas in Europe is struggling to find a market and is getting squeezed out by cheap coal and renewables. But over time, he expects natural gas to fill a growing supply gap in Europe and believes Norwegian gas is well placed as a cost-efficient supply source for the long term.
'No Threat from US LNG'
When asked whether Statoil was concerned about the prospects of competing with US LNG exports, Okland noted that “the initial volumes from the US will not be large” and currently US LNG is on the margin in Europe. Whether US LNG will flow to Europe ultimately will depend on price signals and Statoil believes US LNG could be some of the most expensive source for Europe.
While recognizing the long-term prospects for natural gas remain strong, there’s no doubt that Statoil’s US operations have been challenged by the fall in the price of oil. Statoil’s US operations includes acreage in the Bakken Shale in North Dakota, the Marcellus in Pennsylvania and Ohio, and the Eagle Ford Shale in South Texas.
Schopp acknowledged the challenges of drilling while the price of oil remains stubbornly around $30/b and he said Statoil was working to cut costs and achieve efficiency gains with the goal of being profitable at oil prices of $50/b by 2018.
When asked whether Statoil is looking at bringing liquids to Europe as a way of capturing value from its US acreage, Schopp said, “it’s an interesting opportunity and Statoil is looking at it,” but first there needs to be an arbitrage opportunity and then Statoil would need to scale up in order to capture that opportunity.
Schopp also recalled that Statoil actually went through the US approval process to export condensate and it has approval from the regulatory authorities. Now that the US has approved crude oil exports, the condensate approval process is essentially moot and Statoil, and others, are cleared to export crude oil as well as condensates if the market opportunity arises.
For now, it’s not exactly clear where the market opportunities are, which perhaps explains the unexpectedly large crowd at Cera Week where everyone seemed to be searching for answers to the pressing challenges facing the industry. One thing was clear, however, from the interview: Statoil intends to be on the winning side when energy markets rebound.
Susan Sakmar