As finding fresh reserves offshore Norway becomes tougher by the day, a long-term strategy to establish new core areas around the world has proven to be an outstanding success for the country’s state-owned player.

That strategy has been spearheaded by Tim Dodson, executive vice president for global exploration at Statoil. Recalling the situation in 2010, he paints a grim picture that year in which the company replaced only a third (250 MMbbl) of what it was producing, with the upstream industry as a whole also struggling to replace its resources.

Speaking at the recent SIS Global Forum in Barcelona, Dodson outlined Statoil’s global push over the past four years to continue investing through the drillbit to find new reserves and establish core areas where it could then apply the technologies and decades of experience it has gained on the Norwegian Continental Shelf to maximize the long-term returns from those areas.

Think big

“Statoil had to find new reserves and achieve early access at scale. It was very obvious to me why we were not finding enough—we were not drilling enough deep wells,” he said. The answer was to think big. “Drilling enough high-impact wells has been the key. We have drilled 20 such wells over the past three years, and they have produced 70% to 80% of the volumes we have discovered. We are reaping the rewards now from these core areas around the world.”

The period between 2011 and 2013 saw Statoil discover 3.9 Bboe of new reserves, making 11 high-impact (recoverable reserves of 250 MMboe-plus) discoveries and opening up the new plays. This, he said, was done at an impressively competitive finding cost of around $3 per barrel.

The company’s strategy has seen it increase its net international acreage, and it now possesses what Dodson describes as a robust, balanced and “oily” portfolio with significant follow-up potential.

That portfolio features core areas in the Barents Sea, Tanzania, the Gulf of Mexico (GoM), Canada and Angola, with close to 90% of its activity focused in these areas.

New plays

In the Barents Sea the operator continues to pursue new oil plays in the Skrugard and Wisping discovery areas, with a total of three operated wells to be drilled in the frontier Loop area this year. The chances are good, with Statoil having achieved a 70% success rate with wells drilled in the Barents Sea during 2013.

Tanzania was highlighted as another outstanding exploration success for the company, having achieved a 100% drilling success rate since 2012. With between 481 Bcm and 566 Bcm (17 Tcf and 20 Tcf) of recoverable gas reserves discovered, Statoil is pushing on quickly with its exploration and appraisal program this year.

Off Africa’s west coast, Angola remains an area of continued strong focus for the company, especially now that work by the independent Cobalt Energy has “de-risked the play,” Dodson said. Statoil has a five-block portfolio there, including Block 39, which it operates in the presalt Kwanza Basin and where Statoil discovered a major prospect called Dilola, due to be drilled imminently. “This is a megastructure. It’s one of the biggest closures offshore I have seen this year—but it is high-risk,” he said. Angola remains Statoil’s largest contributor to its oil production outside Norway, yielding around 200,000 boe/d in 2013.

Across the Atlantic in the deepwater GoM, Statoil is currently drilling a high-impact well on the Martin prospect in Mississippi Canyon Block 718, with Dodson saying the company will follow this Miocene probe with another on its operated Perseus prospect. Both are close to Shell’s Vito discovery, in which Statoil is also a partner.

High-grading of prospects

One of the reasons Statoil is enjoying such strong and sustained success with its exploration strategy has been its focus on “high-grading” prospects, its speed of response and a willingness to be flexible when needed.

This global calibration and prioritization of basins, prospects, rigs and seismic has paid off in a number of ways, and Dodson highlighted the benefits in one core area in particular—Canada.

Previously something of an underachieving province, Canada has benefited from Statoil’s ability to accelerate good opportunities. Last year its exploration team highlighted a much better prospect to target than had originally been envisioned. “They had a much better prospect to drill and told us about it, so in two weeks we totally changed our plans and drilled Bay Du Nord instead. We acted swiftly, and now we’re looking at accelerating the development of that prospect. The thing was, we actually tried to farm it out twice previously and failed. So with hindsight I’m glad we did not do it.”

Cracking the code

Dodson went on to describe persistence as a key factor. “We’d found Mizzen previously, things had been rather disappointing, we’d struggled, and then finally we cracked the code with Bay Du Nord,” he said. The discovery, located in the Flemish Pass about 500 km (310 miles) northeast of St. John’s, Newfoundland and Labrador, is currently estimated to contain recoverable reserves of between 300 MMbbl and 600 MMbbl of light oil.

He also pointed out the importance of maintaining “portfolio churn,” as evidenced by Statoil’s recent decision to farm-down its interest in the high-potential Block 39 offshore Angola, keeping a strong equity level but reducing its exploration risk.

With the company due to spend an estimated $2 billion on exploration wells this year and $3.5 billion in total exploration expenditure, capital discipline is vital as the company pushes toward its stated goal of achieving total daily production of more than 2.5 MMbbl.

“We must mitigate cost exposure, improve efficiency and increase focus,” he said. “We have to find more and spend less. I do not have ‘P&L’ [profit and loss] in my department; I just have ‘L.’ So I need to find more oil and gas.”

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