Chris Christie, 6th July 2009
A couple of weeks ago, the Norwegian Petroleum Directorate revealed that the IOR prize for 2008 will not be awarded. The oil prize is presented to fields, companies or individuals that exhibit the “courage, willingness and ability” to improve oil recovery on the Norwegian Continental Shelf beyond statutory expectations.
That doesn’t mean that no one was striving to cross the hurdles set by the NPD, but they failed to get over them. And it has happened before, as the 2002 prize was not awarded either.
The IOR prize has a strategic importance in highlighting Norway’s determination to exploit its hydrocarbon resources to the full. In 2005, the authorities set a goal of reserve growth of 5billion barrels of oil (800million cu m) by 2015. Reserves growth in the last couple of years has been considerably lower than expected.
Several candidates were considered, but none fulfilled the criteria for the 2008 award, and there was clearly great disappointment at the directorate that the prize will have to gather dust.
Witness the statement issued mid-June: “The NPD regrets the apparent lack of willingness to invest for the future, with a conscious commitment to research, technological development, pilot projects, and the willingness to use new methods on the fields.
“It was precisely this type of commitment that created the substantial additional volumes produced from the fields in the 1980s and 1990s.
“We know that several of the oil companies on the Norwegian shelf are working on plans and projects that, in time, can yield good results. However, there seems to be little willingness to make decisions and implement these plans in practice.
“As things stand now, far too many good projects are being postponed. This could result in effects such as the loss of profitable, but time-critical, resources. Making decisions to promote improved recovery in the next few years is particularly important for the large fields.
“There appears to be a trend on the part of the oil companies to prioritise short-term measures to boost production from day to day and to increase production in the year to come. In spite of extremely high oil prices well into 2008, no measures were implemented with a more long-term production perspective.”
I am sure the cynics among us would expect the UK to set targets and then fail to meet them – but Norway? Somehow, we’re conditioned to believing that the Norwegians are a lot smarter at managing their oil&gas resources, are more technology-minded than we are and will push for ultimate recovery. They have a long-term strategy at government level; we don’t, though we make great play of pretending that we do.
Many of us hold the belief that, of all the companies currently active in north-west Europe, it is StatoilHydro that has the best reputation when it comes to long-term strategic thinking, planning and implementation.
Interestingly, the 2000 award went to Phillips Petroleum for improved/extended oil recovery projects decided at a time of low prices – and in real terms, significantly lower than the lows of early-2009.
Surely a good current example is the suite of StatoilHydro long-term drilling contracts which mean drilling activity on the Norwegian Continental Shelf has held relatively firm over this latest oil-price downturn, whereas exploration and drilling activity in UK waters has been decimated.
We talk endlessly about technology and would argue that we’re quite good at coming up with ideas, but it is Norway that gets down to the nitty-gritty of real application and, dare I say it, much of the real innovation, with admiration for StatoilHydro, especially because it appeared more willing to risk new downhole and subsea equipment before counterpart UK-sector operators.
That said, it is intriguing how the UK’s Industry Technology Facilitator has manoeuvred itself into pole position among the various oilfield technology initiatives around the world, not least Norway’s Demo 2000 programme and Brazil’s Procap 2000/3000 initiatives.
Norway’s IOR prize was first awarded in 1998 and has been awarded nine times. Energy hopes someone will have pulled the proverbial socks up enough to warrant an award being made for 2009, which is turning out to be an extraordinary year by any measure.
RIG counts are part of the wallpaper of upstream oil&gas life, with a bunch of indices published, mostly on a monthly basis.
They are the kind of numbers that most of us pay little attention to, unless for a very particular reason, and we are conditioned to thinking that, when the rig count slides it is because oil and/or gas prices are down and operators are tightening belts.
However, at the International Association of Drilling Contractors 2009 World Drilling conference, a senior figure at rig builder Helmerich & Payne set the cat among the pigeons by saying that rig counts, per se, are no longer enough. What about the impact of technology?
I’m quite sure that H&P’s Alan Orr startled a delegate or two back awake when he started to pick through US land-rig data – but in usual detail.
In nearly 20 years of scribbling about oil&gas, I had never heard anyone tease out the detail like Orr did in his deep Hollywood drawl.
He pointed out that rigs had advanced significantly in recent years and were far more efficient than traditional drill packages and could work faster and more flexibly.
That meant that fewer rigs were, in fact, needed to accomplish the same task. In essence, he said new rig technologies were quietly rewriting the onshore drilling book.
Orr said another aspect also broadly ignored is that the number of rigs engaged on horizontal drilling in the US has overtaken units active in drilling vertical wells.
Focusing on gas rigs, he noted that each of the 380 or so units currently engaged on horizontal work was equivalent, in production-intensity terms, to two conventional units.
“Right now, there are 50 more rigs in the United States drilling horizontal sections than there are rigs drilling vertical wells, and it’s not going to reverse,” Orr said.
He added that they might, in fact, effectively be doing the job of 1,000 conventional units.
So what’s my point? It is that one should never simply accept information blindly. Take a few minutes out to delve behind the numbers, whether in a report or something that has just been said.
Things might not always be what they seem and long-held assumptions and rules of thumb may no longer be valid.