Statoil drops leases in the US Arctic
Norway’s state-controlled oil producer has followed Shell out of the high-cost, high-risk Arctic, but downplays the extent of the costs it has incurred there
Statoil is in talks with the authorities and partners about disposing its exploration leases in the US Arctic, following its decision to walk away from the high-cost region, it told PE. But it played down the financial impairments, with only $75m spent on signature bonuses and farm-in agreements so far, and relatively little exploration activity done.
In a statement on 17 November Norway’s state-controlled major said it was committed to optimising its portfolio, strengthening its financial performance and positioning itself for long-term value. The leases in the Chukchi Sea were no longer considered competitive within Statoil’s global portfolio, so the decision has been made to exit the leases and close the office in Anchorage, Alaska. “Since 2008 we have worked to progress our options in Alaska. Solid work has been carried out, but given the current outlook we could not support continued efforts to mature these opportunities,” said Statoil’s executive vice president for exploration, Tim Dodson.
Statoil told PE that the office was “very small” and apart from some environmental and seismic data collected some years back, it had not committed to spending much. The impairments will be included in the fourth quarter results next year.
The decision means Statoil will exit the 16 leases it operates and its stakes in 50 leases operated by ConocoPhillips, all in the Chukchi Sea. The leases were awarded in the 2008 lease sale in Alaska and are due to expire in 2020. “Now we will talk with our partners and the authorities to find a way out with regard to the leases. This could include selling back to ConocoPhillips or to another buyer,” Statoil told PE.
On a positive note, Dodson said the studies, research and activities which have taken place in Alaska, have given the company significant skills and expertise that can be leveraged in other opportunities in northern environments in the future.
In September, Anglo-Dutch major Shell walked away from some $7bn it had spent in Alaska after a disappointing well result there over the summer. But the company also faced high costs, owing to the harsh environment that limits drilling opportunities; and to the regulatory need to have another rig on stand-by to deal with a blow-out. It also came under a lot of pressure from environmental groups to abandon its operations there.