A Petoro Perspective of Today’s Upstream Challenges

With a third of Norway’s oil and gas on its books, state-owned Petoro has a unique perspective, from the macro right down to drainage strategies.

Today, Petoro VP Licence and technology Kjell Morisbak Lund sees that the industry has many difficult challenges, from financial and environmental sustainability down to data-driven drilling and drainage. Some of the major changes now shaping the industry include aging subsea infrastructure and net zero production goals to the implications of energy security concerns on reserves replacement in Norway and how value chains are yet to catch up with digital innovation.

Lund shared his thoughts on a wide range of these challenges during the Underwater Technology Conference (UTC) conference in Bergen, June 14-16.  

For Petoro, the principal goal is to maximize the value of the Norwegian Continental Shelf (NCS), explains Lund. But this is getting harder as changes, from climate through to energy security, happen more rapidly. “For an industry that works on long lead times and slow processes, this is a challenge,” he says.

Petoro’s approach is to focus on the fundamentals, the three most important being sustainability, drilling and drainage strategies, and future orientated developments. “Sustainability is an important theme and part of that is financial sustainability,” explains Lund. “You need financial sustainability. If there is no business, you are not very sustainable. Safety and climate, which is increasingly major topic, are also important.

“Next is drilling efficiency and drainage,” he says. “Our ability, as industry, to put holes in the ground, efficiently, is fundamental. But we also need to optimise the drainage strategies. There have been rapid developments in our capabilities here, making use of these, especially advances in the digital space over the years, gives us a lot of opportunities in a mature basin like the NCS.

“Last, we need to look to future orientated field developments. This is a kind of a balancing act, balancing cost and implementing new concepts. You need to develop and implement flexible concepts that are fit for the future, with a minimum for pre-investment.

“There used to be a lot of upfront investment, to be prepared for the future, and that paid off in the past. But we’re not in a position where anyone would like to invest in this way these days, because of the uncertainty there is.”

The backdrop to all this is a maturing basin, says Lund. While subsea could be perceived as a younger industry, there is in fact a lot of mature infrastructure now in place. This is now likely to start attracting the integrity management, modification and consolidation activity that’s been seen around topside facilities. “The new challenge is how to address the subsea infrastructure as it matures and acknowledging the same drivers that we have seen towards surface facilities; integrity management, modification, consolidation.”

However, a more fundamental challenge for the basin is around reserves replacement and the how remaining reserves will be realized. “Going forward, the majority of the remaining reserves will have to be realized through existing infrastructure and that has implications,” says Lund. “All new development will also have to take into account sustainability issues more than ever. Any new development will have to be as zero emission as possible.

“At Petoro, we are putting in a lot of investment in emissions reduction measures. It’s not more than three years ago that we were talking about this and it was hard to justify the kind of investment we’re making now and I think it will increase. We have to have a business case and the authorities have to give incentives so our industry can do the right thing. But, going forward, we will have to do even more and that will be an interesting discussion.”

In light of the current geopolitical environment, which has significant implications towards energy policy, accelerating production has also become a key issue, says Lund, thanks to Norway’s being seen as a key supplier to Europe. "How can we accelerate and take out more of our resources? Because we have a negative reserve replacement ratio on the NCS, acceleration effectively means maintaining capacity. What are the consequences of that? I don’t have all the answers, but it’s one of the challenges we have to face.

Another area where the industry needs to keep pace is around digital technology, suggests Lund, not just its adoption, but how it’s then leveraged. Despite being increasingly rigged for faster decision making, the processes the industry works on are the same and the value chains are basically the same, he says. “Much of thinking is still the same, the way contracts and incentives are set up are the same and there’s something to work on there.

“There is also talk about the shared economy and standardization. This is another change that’s happening. Most welcome this, however, are we willing to take the consequences? Are you willing to commit to a shared economy with all its implications?”

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