Statoil is a major player in Newfoundland and Labrador’s offshore oil industry, thanks in large part to discoveries it’s made in the Flemish Pass Basin, particularly Bay du Nord in 2013. And that’s why the company’s every move is watched with great interest in the province. As president of Statoil’s Canadian business arm, Paul Fulton is the man in charge of the Norwegian-based company’s work in Newfoundland and Labrador. He says the Flemish Pass, Bay du Nord and the province hold lots of promise, but it must compete for capital with other assets in its global portfolio.
Natural Resources Magazine: When I saw you speaking in St. John’s last year you said Statoil can’t have projects that break-even in the US$80-$90 range anymore. Do your discoveries in the Flemish Pass Basin meet that threshold?
Paul Fulton: We have a pretty strong portfolio of projects in Statoil at the moment, in Norway, Brazil, the United States and around the world. We see that costs are coming down across the board. To be competitive in that portfolio we still need low break-even projects. The Flemish Pass has the potential for that, but that depends a lot on the work we are doing and the types of discoveries that you make.
NRM: So where does the Bay du Nord discovery rank in Statoil’s portfolio?
PF: We’ve made this good discovery at Bay du Nord. It’s not competitive yet in our portfolio. We’re working hard to make it competitive. We’re doing some studies and it is mainly internal work at the moment to try and make the project more competitive.
NRM: Why isn’t it competitive?
PF: The break-even price is still too high.
NRM: Will Bay du Nord ever be developed then? If so, when might that happen?
PF: It’s difficult to predict. There is a combination of factors that play into that. There’s the technical work that we’re doing to improve the project and make it competitive. But it also depends on our global portfolio of projects. We have to prioritize the best projects. It also depends on the oil price and where that is today and where we expect it to move to over the years.
NRM: Do the operating conditions in the Flemish Pass add to the difficulty in making that decision?
PF: It is a tough environment to develop a project. We’re further offshore than, I think, any project that has been developed anywhere in the world. It’s approximately double the distance of our furthest offshore projects in Norway. That’s a costly and logistically complex challenge. You’ve got high seas, icebergs, sea ice and fog. Those are tough conditions. We believe we can manage those in a good way and safely, but it makes those projects more expensive to develop and so there needs to be more focus on trying to get the economic parameters right to make it work.
NRM: Late in 2016 Statoil sold its oil sands assets in Alberta for over $800 million. Why did it get out of the oil sands and remain in offshore Newfoundland, and how will this deal change its spending and operations in the province?
PF: The reason for the exit from the oil sands was very much based on commercial opportunity. We do want to focus on our core assets, and that includes Newfoundland and Labrador, but it’s also Brazil, U.S. onshore, Norway and the rest of the portfolio. How things might change depends on where offshore Newfoundland and Labrador fits into our global portfolio. We make big commitments on exploration there. We are hopeful of the prospects, but it needs more work before we’re ready to commit on any particular project at the moment.