DEMANDING TIMES - Norsk olje og gass

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Erna Solberg
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DEMANDING TIMES
REPORT OF THE BOARD 2015
REPORT OF THE BOARD 2015
INTRODUCTION
The Norwegian petroleum industry
has been through a demanding
year. After several years of record
investment on the Norwegian continental shelf (NCS), the sector is now
in a period with oil prices halved,
big cost cuts required and a growing
focus on climate issues.
The climate represents today’s most important
challenges. Norway’s oil and gas industry supports
the climate goals set by the UN and the Storting
(parliament), and works continuously to reduce
its footprint. At the same time, demonstrating
the relationship between population growth,
rising living standards, energy requirements
and the energy mix is important.
Staged in March under the title A time of change,
the Norwegian Oil and Gas annual conference
concentrated on the challenges facing the industry.
Prime minister Erna Solberg and Labour Party
leader Jonas Gahr Støre were among the speakers,
along with Tor Arnesen, chair of the board.
The Norwegian Oil and Gas strategy for 2015-17
identifies the most important issues it will pursue
as an industry association to overcome the challenges facing the sector.
Its ambition for this period is to secure recognition
for the Norwegian oil and gas industry as the main
driving force for value creation and innovation,
and as a sector which actively addresses issues
related to global climate change.
This year’s report of the board concentrates
on presenting the measures which have been
initiated on the basis of the four strategic
areas and the 12 goals in the strategy.
THE NORWEGIAN OIL AND GAS
BOARD FOR 2015
Tor Arnesen (chair), A/S Norske Shell
Arne Sigve Nylund, Statoil ASA
Morten Mauritzen, Esso Norge AS
Bernd Schrimpf, Wintershall Norge AS
Atle Sonesen, VNG Norge AS
John E Stangeland, Norsea Group AS
Egil Aanestad, Halliburton AS
Torjer Halle, Schlumberger Norge AS
Ingvild Sæther, Teekay Shipping Norway AS
After Gro Brækken resigned as Director General
on Feb. 28, 2015, Deputy director general Knut
Thorvaldsen was acting until Karl Eirik SchjøttPedersen was employed from 29 April 2015.
With effect from 1 September, a special climate
and environmental department was established
with Hildegunn Blindheim as director.
At the end of November 2015, Norwegian
Oil and Gas has 44 employees, of which 31
in Stavanger, 12 in Oslo and one in Tromsø.
2
Its ambition for this
period is to secure
recognition for the
Norwegian oil and
gas industry as the
main driving force
for value creation
and innovation.
REPORT OF THE BOARD 2015
1.0 THE CLIMATE
1.1 ACHIEVE SOCIETY’S ACCEPTANCE
OF GAS AS PART OF THE SOLUTION
FOR TACKLING CLIMATE CHANGE
Norwegian Oil and Gas initiated an updating
of the basic facts about the way natural gas is used
in the EU. Presented in a report from the Thema
consultancy and analyst company, this provides
a better factual basis for future communication
about the role of natural gas in the energy mix as
part of the climate solution. The communication
message on the interaction between gas/renewable energy is being further developed through
a collaboration with the companies as well as
with the GasNaturally initiative and the renewables sector.
The association has been an active participant
in the debate on gas versus coal in relation to
associated methane emissions. An animated
film about the climate issue has been produced.
A number of dialogue meetings have been held
and suggestions submitted to various EU fora.
Input on the EU’s Arctic policy has been provided
to the European Commission, and a continuous
dialogue is being pursued with various stakeholders in Brussels. A meeting is planned
between the director general of Norwegian
Oil and Gas and one or more key European
commissioners in the industry and energy
areas during the first quarter of 2016.
1.2 SUPPORT THE INDUSTRY’S EFFORTS
TO REDUCE EMISSIONS TO THE AIR
Work on preparing an updated climate report for
KonKraft is by and large on schedule. The project
commissioned Menon in the spring of 2016 to
prepare an analysis of the available instruments
which the petroleum sector can utilise for developing new emission-reducing technology. This
work has been somewhat delayed, but is nevertheless expected to be completed on schedule –
in other words, by 31 March 2016.
A joint industry project on energy management/
efficiency enhancement began in April with DNV
GL carrying out the work. A number of meetings
have been held with the companies. Many of the
latter held meetings between their own experts
and DNV GL on the status of implementing and
following up their energy management. Seminars
on various subjects were also staged, along with
working sessions where the companies were
active contributors. The project is working
actively on the way energy management can
be implemented in the right line organisation,
establishing proposals for good key performance
indicators (KPIs) at the various management levels,
and acquiring good examples of measures which
can be implemented on a number of installations.
Attention is also being paid to learning good
lessons about using instruments such as Enova
and The Business Sector’s NOx Fund to generate
further measures which are uneconomic in
commercial terms.
The companies have collaborated since 2014
with the Norwegian Environment Agency (NEA)
in a project to establish better data on emissions
of short-lived climate forcers, such as methane
and non-methane volatile organic compounds
(nmVOCs). New calculation methods and emission factors for the direct release of these components will be incorporated in the Norwegian
Oil and Gas guidelines on emissions in 2016.
The NEA is very satisfied with the collaboration,
and the companies have made the necessary
specialists available throughout the project.
All the operators have been ordered to study
measures for reducing emissions, including
cost/benefit analyses, by March 2016.
1.3 WORK ACTIVELY WITH THE
INDUSTRY ON CCS AS A MEASURE
FOR TACKLING CLIMATE CHANGE
Three dialogue meetings have been held with the
Ministry of Petroleum and Energy and Gassnova
on carbon capture and storage. The ministry
wants a continued dialogue in order to exploit
the industry’s expertise in national work on CCS.
Work on preparing the sector’s position has been
somewhat delayed by the ministry’s decision to
put a feasibility study for carbon storage on the
NCS out to competitive tendering. Bids must be
submitted by December, and plans call for a decision on further action and the choice of company
to do the work to be taken in June 2016. The work
group will continue its activities in 2016.
3
The association
has been an active
participant in the
debate on gas versus
coal in relation to
associated methane
emissions.
REPORT OF THE BOARD 2015
2.0 THE FAR NORTH
2.1 ACHIEVE SOCIETY’S SUPPORT FOR
FURTHER OIL AND GAS DEVELOPMENT
IN THE FAR NORTH
AND
2.2 WORK FOR OPENING THE WATERS
OFF LOFOTEN, VESTERÅLEN AND SENJA,
AND IN BARENTS SEA NORTH-EAST
The far north and access to new acreage have been
key areas of activity. Providing input to the government in the form of consultations, meetings and
participation in various consultation exercises
is an important part of this work. Subjects have
related in particular to the 23rd licensing round,
expanding the awards in predefined areas (APA)
scheme, and petroleum operations in the Barents
Sea in general. Oil spill response is an important
topic, where particular efforts are being made with
conditions related to cross-boundary pollution.
Legal and compensation issues as well as roles
and responsibilities in the event of responses
in the Russian sector will be important topics in
the future. Work on good co-existence with the
fishing industry has also had a high priority.
The One Ocean top managers forum represents
an important arena for these efforts.
Bilateral meetings and conversations with the
Norwegian Fishermen’s Association are another
priority. Dialogue has also been pursued by
Norwegian Oil and Gas with several regional
fisheries organisations. The association contributed to expanding the Basec industry collaboration to include any company wishing to participate. Norwegian Oil and Gas participated in the
Nordland Petroleum Council in 2015, and has
made important contributions there to the
work of arguing for opening the waters off
Lofoten and Vesterålen.
A work group of the committee for licensing policy
has drawn up proposals on behalf of KonKraft
to prioritise opening processes for new acreage,
and has discussed how conflicts with other
industries can be minimised in such areas. Its
proposal was approved by the full committee.
Norwegian Oil and Gas made an active contribution to establishing the Arctic Economic
Council (AEC), and currently chairs AEC Norway
– a partnership of the Norwegian organisations
involved in this work. Among other successes,
the association succeeded in having Tromsø
selected as the seat of the AEC secretariat,
which was officially inaugurated by the
minister of foreign affairs in the north
Norwegian city during September.
The far north
and access
to new acreage
have been key
areas of activity.
4
REPORT OF THE BOARD 2015
2.3 CONTRIBUTE TO ENHANCING
EDUCATIONAL OPPORTUNITIES AND TO
ATTRACTING PEOPLE TO THE INDUSTRY
Heads, science teachers and careers advisers in
schools are important target groups, and information arenas for these have been maintained
or newly established as part of the association’s
commitment.
Activities particularly linked with northern
Norway include Blue:Raw:Rumpus, a collaboration between the petroleum, fishing and aquaculture industries. This project aims to inspire
lower-secondary pupils to appreciate the value
available in the far north and the opportunities
which open up for young people who succeed
in completing their education.
During a single school day, pupils learn about
the natural resources and operations of the petroleum, fishing and aquaculture sectors in a creative
way. They are also intended to come up with ideas
for new companies based on local resources.
The project has so far completed one round in
Nordland and another in west Finnmark. It will
start up in Troms during November and continue
along the same lines for another two years. The
three industries have the same goals here and
collaborate in reaching them. They want young
people to live and work in the region and to educate
themselves to work with the resources which
benefit the whole of Norway.
A Young Energy breakfast is staged by Norwegian
Oil and Gas in Harstad every other month. This
brings together young people in the town who
work for the oil and gas industry. Local companies
arrange breakfast and give presentations on
activities in northern Norway. The aim is to
secure a wider network for such employees and
to broaden their knowledge of and familiarity
with other companies in the same area.
The association organised a workshop for students
in northern Norway in connection with the Petro
2015 conference. Participants were divided into
groups to prepare presentations for the conference
the following day. The topics were energy in the
far north and falling oil prices, and the students
attended the whole conference to learn about
petroleum activities in the region.
Moreover, a Petroleum Day is being planned
at the University of Tromsø.
The PetroChallenge competition is being staged
for the 10th time. Covering schools in four counties, this oil simulation game for upper-secondary
pupils requires players to act as an exploration
team for two days.
An annual meeting is organised for careers
advisers and science teachers in northern Norway.
This year’s session took place in Tromsø in collaboration with the Tromsø and Svalbard branches
of the Confederation of Norwegian Enterprise
(NHO) and member companies in the region.
Norwegian Oil and Gas also assembled the Careers
Forum for technical sessions to present activity
in and prospects for northern Norway, and to
provide an update on general conditions for
recruitment and the need for expertise in the
country as a whole.
The association has participated in education
fairs nationwide for 17 years. It attended events
this year in the large urban centres of southern
and northern Norway. These fairs attracted
a total of 60 000 young and adult visitors.
The association
has participated
in education
fairs nationwide
for 17 years.
5
REPORT OF THE BOARD 2015
3.0 INDUSTRY GROWTH AND COSTS
3.1 COMMUNICATE THE INDUSTRY’S
SIGNIFICANCE FOR VALUE CREATION
AND INNOVATION
Norwegian Oil and Gas’ main message in the
public debate is that petroleum ranks as Norway’s
largest and most important industry, and makes
a substantial contribution both to income for
society and innovation for the future. Norwegian
Oil and Gas will give greater prominence in the
future to issues which strengthen the industry’s
reputation in this area.
Long-standing contacts with the Ministry of Trade,
Industry and Fisheries on developing the Norwegian
supplies industry continued during 2015. This work
included meetings between the sector and the
minister of trade and industry, while Norwegian
Oil and Gas organises company visits for both the
minister and ministry civil servants. Feedback
from the ministry indicates that these are very
useful sessions which help it to take better account
of the oil and gas sector when formulating policy.
Norwegian Oil and Gas places great emphasis on
the importance of R&D in ensuring a long-term
future for the industry, and therefore maintains
close contacts with OG21 and other programmes
pursued under the auspices of the Research
Council of Norway.
Norwegian Oil and Gas believes a close dialogue
with politicians to be important, and had its own
events during the Arendal Week for the first
time. Experience from these was positive. The
association held two meetings to debate technology transfer and spin-offs for local authorities respectively. The first of these events was
conducted in cooperation with Abelia and the
Federation of Norwegian Industries.
3.2 WORK FOR SUSTAINABLE AND
COMPETITIVE WAGES AND SALARIES
IN THE INDUSTRY
Agreement on the interim pay settlement for 2015
was reached between the Norwegian Confederation
of Trade Unions (LO)/Confederation of Vocational
Unions (YS) and the NHO on 26 March. While no
general pay rise was awarded, a low-pay supplement of NOK 1.75 was agreed. The framework was
set at 2.75 per cent. Norwegian Oil and Gas pursued
negotiations on an intermediate settlement for the
offshore agreements with the Norwegian Union of
Industry and Energy Workers (IE), the Norwegian
Union of Energy Workers (Safe) and the Norwegian
Organisation of Managers and Executives, and for
the oil service agreements with the IE and Safe.
These talks were conducted in May, and only the
Norwegian Organisation of Managers and Executives had the right to take industrial action.
A general supplement of NOK 5 500 and a lagging
pay gain of NOK 3 896 were agreed in the offshore
area. Conference time was increased by NOK 1.50
and the night work supplement by NOK 0.50.
Remuneration for working on public holidays was
set at NOK 1 900. The framework for annual pay
growth adopted by the two sides was lower than
that agreed by the lead sectors.
The general supplement under the oil service
agreements was NOK 5 160, with the shift and
night work supplements increased by NOK 1.00
and remuneration for working on public holidays raised to NOK 1 900.
Talks were demanding, and the association
would have preferred to see a lower result.
But it was satisfied that the outcome was
a lower framework than that determined
in the national negotiations.
3.3 WORK FOR COMPETITIVE AND
PREDICTABLE FISCAL CONDITIONS
Tax incentives for improved recovery have been
an important issue in 2015. Norwegian Oil and
Gas analysed various fiscal moves which could
incentivise such action. It also commissioned
a study of the volume and value potential offered by
implementing projects which are profitable in
socio-economic terms but unattractive for the
industry without incentives. The gross value and
potential tax revenues are substantial. This has
been presented to the government and argued
for in many arenas, including meetings with the
Minister of Finance. It has also been put forward
as a comment on the central government budget
for 2016, and in hearing with The Standing
Committee on Finance and Economic Affairs.
6
Norwegian Oil and
Gas’ main message
in the public debate
is that petroleum
ranks s Norway’s
largest and most
important industry,
and makes a substantial contribution
both to income for
society and innovation for the future.
REPORT OF THE BOARD 2015
4.0 SAFETY AND REGULATIONS
4.1 LEARN FOR EARLIER EXPERIENCE
AND REDUCE MAJOR ACCIDENT RISK
Norwegian Oil and Gas has opted to emphasise
the following subjects with a view to reducing
major accident risk: hydrocarbon leaks, well
incidents, learning from serious incidents,
and risk management.
Statistics show that the number of undesirable
incidents and accidents on the NCS is at a record
low today. See the report on Trends in risk level
in the petroleum activity (RNNP). Overall risk
is at the lowest level measured since 1996.
Norwegian Oil and Gas currently collaborates
well on safety with the Petroleum Safety Authority
Norway (PSA) and the unions. No fatal accident
has occurred on the NCS since 2009, which partly
reflects the fact that the industry takes safety
seriously and works continuously on learning
and risk-reducing measures.
The good safety results achieved in 2014 were
repeated during the first nine months of 2015.
Through its Black Swans project – an expanded
perspective on understanding, assessing and
managing risk – Norwegian Oil and Gas has
conducted activities and developed communication materials to promote increased risk understanding.
Norwegian Oil and Gas has also taken the
initiative on a project which will assess the
methodology for and benefit of risk analyses
as these are used in petroleum operations.
A substantial potential for improving quantitative risk assessment (QRA)/risk analyses
has been identified.
4.2 ACHIEVE COST-EFFECTIVE
STANDARDS AND INCREASE THE USE
OF INTERNATIONAL STANDARDS
Norwegian Oil and Gas works to ensure that
standards help to enhance the competitiveness
of the NCS. They must be assured to yield costefficient solutions, while also helping to ensure
an acceptable level of NCS safety.
It is important that the standards contribute
to good technical and cost-effective solutions
in the petroleum industry. That will in turn influence the way the industry is able to ensure good
resource utilisation and the best possible petroleum management.
The board of Norwegian Oil and Gas adopted
a new strategic position on standardisation
in September 2014. Its purpose is to establish
long-term goals and guidance for standardisation work by Norway’s petroleum sector, and
to specify guidelines for achieving these targets.
Some of the principal elements in this strategic
position involve revitalising the assumptions
underpinning the original Norsok project,
including promoting the content of the Norsok
standards for international adoption. The new
commitment to petroleum standardisation also
involves an increased concentration on the work
of developing and revising international and
national standards.
Improving processes in standardisation work
has been important for ensuring that the industry’s needs are met. One of the main points in
the Norwegian Oil and Gas strategic position
is to conduct a review of all Norsok standards.
This review or project has been called the
Norsok Analysis, and is a joint commitment
by Norwegian Oil and Gas, the Federation
of Norwegian Industries and the Norwegian
Shipowners Association.
Norsok Analysis will contribute to achieving
the following goals for the industry:
increase the use of international standards
reduce the use of special Norwegian requirements
ensure that standards which the industry
decides will be issued by Norsok contribute
to cost-effective solutions
help to enhance the competitiveness of
the NCS – in other words, make it attractive
for investment while encouraging exports
by Norway’s petroleum supplies sector
ensure an acceptable level of safety
7
The number of undesirable incidents
and accidents on the
NCS is at a record
low today.
REPORT OF THE BOARD 2015
This project will produce a final delivery where
the existing Norsok portfolio is categorised
in the following terms:
which Norsok standards are to be recommended for international adoption?
which Norsok standards are to be recommended for retention?
which Norsok standards are to be recommended for withdrawal?
Norwegian Oil and Gas has also taken the initiative on a project to identify areas in the drilling
and well sector where experience indicates the
presence of many company-specific technical
specifications which could act as cost drivers
for the industry.
Together with the Federation of Norwegian
Industries, Norwegian Oil and Gas provides
the secretariat for the standard contract board,
which is mandated to negotiate new/updated
standard contracts between the operators and
the supplies industry. Agreement was reached
in 2015 on such documents for modification
work and for engineering, procurement,
construction and possibly installation (EPC(I))
assignments. Norwegian Oil and Gas would
emphasise the significance of adopting these
contracts as part of the work of enhancing
efficiency and reducing costs on the NCS.
The industry has identified a need to revise the
set of agreements which underlie production
licences. Norwegian Oil and Gas has accordingly
proposed to the Ministry of Petroleum and
Energy that a revision of the collaboration and
accounting agreements be initiated, with the
industry making itself available to contribute
to the work. This is a wide-ranging and important issue, and discussions are still under
way with the government.
4.3 WORK FOR COST-EFFECTIVE
AND PREDICTABLE REGULATIONS
Further development of a regulatory framework
for the petroleum industry which is cost-effective
and predictable represents a strategic objective
for Norwegian Oil and Gas. This applies to provision which determine operating parameters. The
health, safety and environmental (HSE) regulations represent an important element in these.
In various contexts, the board of Norwegian Oil
and Gas has highlighted the significance of conducting good cost/benefit analyses before new
regulations which require additional spending
are introduced. It is therefore extremely positive
that the Ministry of Labour and Social Affairs,
on behalf of the government, has initiated the
development of methods for conducting cost/
benefit analyses when changes to the HSE regulations are proposed. Norwegian Oil and Gas
will continue to follow up this work.
Norwegian Oil and Gas followed up various
consultation processes during 2015. It submitted
a response to the PSA’s project report on the free
flow of rigs, which was submitted to the Ministry
of Labour and Social Affairs on 1 July 2015. Another
important issue has been following up proposed
new regulations for lifeboats and so forth, where
the industry has argued strongly that a cost/
benefit approach is needed when assessing new
requirements for existing lifeboats on the NCS.
Other possible proposals for improvements
to the existing regulations have also been
assessed by Norwegian Oil and Gas, which
has established a project to assess the rules
relating to producing-life extensions. This
will yield a report which can be utilised in
a continued dialogue with the PSA.
8
The industry has
identified a need
to revise the set of
agreements which
underlie production
licences.
REPORT OF THE BOARD 2015
OTHER MATTERS
INTERNATIONAL RELATIONS
KONKRAFT
Norwegian Oil and Gas maintained its involvement
during 2015 with issues under consideration
by the EU which could be relevant for Norway’s
petroleum sector. It works closely with the NHO
in Brussels, and with the Brussels representatives of a number of the member companies.
Collaboration with the International Association
of Oil & Gas Producers (IOGP) has been strengthened. The biggest issue in 2015 has been work
on the European Commission’s proposal for
a hydrocarbons best available techniques reference (Bref), which has the potential to generate
new detailed regulation of offshore operations.
This issue remains to be settled.
Norwegian Oil and Gas has continued its role
as the provider of KonKraft’s secretariat, which
is based at the association’s Oslo offices. In
addition to its own council meetings, which
the minister of petroleum and energy is often
invited to attend, KonKraft’s attention has been
concentrated on updating its 2009 reports on
the far north and the climate. These are due
to be completed in early 2016.
The association is involved in a number of IOGP
committees – some actively, others in order
to stay informed about international issues.
Norwegian Oil and Gas is in regular touch with
Oil & Gas UK, and will further reinforce these
contacts in the time to come. Collaboration
with the other national interest organisation
in Europe was not particularly active in 2015,
but Norwegian Oil and Gas will take initiatives
to revitalise such cooperation.
9
Norwegian Oil
and Gas is in regular
touch with Oil & Gas
UK, and will further
reinforce these
contacts in the
time to come.

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