Wednesday 19 October 2016

Norwegian player Statoil has set a new strategy aiming to pave the way for an easy transitioning towards a low carbon future with renewable energy integration.

Statoil’s chief executive Eldar Saetre said during the Oil & Money conference in London that, as the Paris Agreement is set to enter into force on 4 November, the company continues to work on its strategy.

“Transitioning to a low carbon future will transform the oil and gas industry, from how we produce to how we consume energy. In this transition, we must do more than just react and adapt. We must lead the way as an industry towards a low carbon future,” Saetre said.

Looking forward to 2040, Saetre said the company considered three future energy scenarios for its upstream business, renewable energy sector and a collaboration over the two.

“Unsurprisingly, coal is expected to fall by around 50%, while renewable energy will continue to grow. But oil and gas accounts for more than half of the world’s energy demand. We power countries, economies and growth. It’s impossible to imagine a world without oil and gas during this transition,” Saetre said.

“As an industry we need to show that we are part of the long-term solution. And one of the most effective ways of reducing carbon emissions is replacing coal with natural gas.”

However, he added that, in any of the 2040 scenarios that the company looked at, production from existing reserves is not even close to keeping up with demand.

“This means there is a continued and significant need for more exploration and investment in new oil and gas,” he said.

“I'm convinced that a low carbon programme will increasingly be a competitive advantage in our industry as tighter regulations and additional increasing costs come into place. Renewable energy investments have increased, but many think renewable energy is still expensive and requires many subsidies.”

“While they do in many cases, technology is advancing and helping renewables become increasingly cost-competitive. We expect this trend to continue and even accelerate. We could chose to see this as a threat to our business, but instead we will look upon this as an opportunity,” he said.

According to Saetre, the industry is heading towards change, with some companies choosing to remain pure oil and gas producers for as long as possible, while other gradually transitioning into renewable energy companies.

“Statoil approach will be to take an active part in shaping its transition through synergies and create long-term value for our shareholders. Our business area, called New Energy Solutions, is responsible for our strategy for low carbon energy. Its starting point is our well-established business in offshore wind. And our current projects put us on track to deliver electricity to around 5 million people,” he said.

“For Statoil, renewable energy compliments our portfolio in a good way. Both from an industrial and from a strategic point of view, and from a financial perspective. Not only can renewables be competitive, but also add longevity to our portfolio an offer increased resilience against the cyclical nature of all our oil and gas business.”