Please note that questions can be posted by means of telephone only not directly from the web. The dial-in numbers for posting questions can be found on the website. All the presentations are published on statoil.com. I currently ask you to make special note of the information regarding forward-looking statements, which is attached to the presentations.It is now my privilege to introduce Statoil’s Executive Vice President for Exploration, Mr. Tim Dodson. Please. Tim Dodson – Executive Vice President, Exploration Thank you, (Hilda) and good afternoon and good morning to everyone wherever you might be. And welcome to Statoil’s exploration seminar and I guess we couldn’t have picked a much better day, a little bit fortunate with that, but that's how it is sometimes. Luck does play some part in exploration, but hopefully as we will be able to demonstrate to you through the next three hours is not only about luck. And of course what I am thinking about is the updated information on the Pao de Acucar discovery in the Campos basin in Brazil. We issued a press release at 12 o’clock as do the operator Repsol, where we have communicated significant upgrade in volumes for the pre-salt discovery in the Campos basin. And as you have probably seen, we are now communicating volumes of more than 700 million barrels recoverable of light oil and 3 TCF of gas. And for those of you who need a conversion fact of that, so you can multiply by 180 to get barrels of oil equivalents. So, this in itself is a joint discovery, more than 1 billion barrels, very significant in itself, but as stated also in the press release, very important for our position otherwise in Brazil. And we think also very important for the acreage, which we picked up in the Angola, the pre-salt acreage which we picked up there at the end of 2011.
Our plan was and still is with this seminar to give you some more insight to dig deeper behind the successful exploration program, which we have run over the last year and a half, tried to explain to you what we do and why we do it, what things are important for us. So, that hopefully through this afternoon, you will understand more about our strategy, more about why we have had the success we had. And hopefully I can build even more trust and confidence in our ability to deliver similar kind of success in the future.You are all familiar with the updated corporate strategy and hopefully you will recognize that one of the most important or one of the important building blocks on this is to develop a leading global exploration company. As I mentioned to many of you before, that this part or this chapter of the exploration story really started about three years ago. When I was asked to take over the responsibility for the global exploration unit in Statoil, we quickly made a decision that we should revisit our strategy. We should thoroughly examine what we had been doing, what others were doing, and then make a conclusion as to whether we need to change how we were doing things. That strategy was approved at the end of 2009 and subsequently implemented. I’ll come back to that. Then on 1st of January 2011, year and a half ago, there was a major reorganization of the company and the decision was made for exploration to have a seat on the Executive Committee of Statoil. I was asked to take on that position. I was very glad to accept. And that was also one of the elements, which we’ve drawn up in the strategy that we – it would probably be beneficial for us to have one exploration unit rather than have three. Previously, we had a separate unit for Norway. We had a separate unit for the international exploration. We had a separate technical unit. And I think what it has allowed us to do it’s allowed us at least to prioritize in a truly global fashion.
And then I think the third element is obviously the recent successes. It doesn’t hurt to have early success. And we have had quite a lot of that over the last few years probably significantly more than we expected, i.e., more larger, finds quicker than we expected. We now have six high impact discoveries, of which two, are joint discoveries, i.e., more than a billion barrels of oil equivalent on a 100% basis, the onsite drip and now Pao. We have also secured significant new acreage positions and I’ll return specifically to the deal we did with Rosneft a little bit later in my talk. And I think we have strengthened our position, our core positions, i.e., in Norway and Gulf of Mexico quite substantially over the last 18 months too.None of this is possible without strong HSE performance. We have had a good development when it comes to our HSE statistics, the one which is shown on the left is all serious incident frequency, i.e., the number of serious incidents we have per million man hours worked. And as you say that the level now is around about one eye, one incident per million nine years worked on all of our operations whether it be exploration, development, or production. Having excellent HSE results and I am thinking about all of the aspects, but especially about safety and the environment aspects. They are prerequisite and our license to operate wherever it might be. It also helps us to become a preferred partner and by that I mean maybe also in the operator, which others choose to work with and it definitely does give us a competitive advantage. Exploration is involved in many aspects and of HSE many types of operations, but in particular the seismic and exploration drilling operations. My exploration unit has responsibility or accountability for all seismic acquisition in Statoil be it exploration, development, or production purposes. We become a strong well portfolio. Of course, so we are the first to test the different areas that means that we know typically less when we go into these areas than we do on the Norwegian shelf or places like the Gulf of Mexico.
So, we have to be able to take very good care or we need to have to be prepared for all eventualities. And I can say to you that the exploration statistics, these are the core positions I’ll show, the exploration statistics over the last two years are equally as good as what we have done in the corporate.As you know from our global footprint, we have different challenges we are facing. Physical challenges like ultra deepwater I mentioned 2,800 meters of water depth on Pao, similar in Tanzania, similar in Gulf of Mexico. In other places, you can add to that the challenge of seasonable icebergs, things like seasonal icebergs like in the – of the Northeast Coast of Canada. You can add small margins, high pressure, high temperature conditions, Gulf of Mexico just about every well you drill is very challenging for that respect. King Lear, another we – you all know about the King Lear well in the south of the North Sea. And then more recently, we also have to handle other issues like the threat of piracy of the eastern coast of Africa and that threat is real. I am not going to the details, but there are lot of evidence that there is the piracy activity is it’s there, it’s real, and it’s active all the way down through East African coast. So, we don’t only have to maintain, but we have to continue to focus and improve on this. And the reason for that is that we have to be ready for even more demanding challenges going forward. In the Arctic especially, we have acreage in Alaska. We have acreage offshore Northeast Canada, but also of the north board known the Beaufort Sea and not least now with the position we have picked up with Rosneft offshore Russia both in the Barents Sea and the Sea of Okhotsk, where ice is also a challenge. So, this is our license to operate and it’s something that we have to – continue focus on day-in, day-out.
I think I can safely say that we have delivered on our exploration strategy. And our exploration strategy is really quite simple is about three things, is about early access at scale, is about drilling more high-impact wells, and it’s about exploiting our core positions. Early access at scale is the kind it says itself, but it’s really enabling larger acreage uptake at lower cost. Yes, maybe some more risk, but at the same time also potentially more reward, and ideally if you get in early, you should be able to do this at lower cost, although as you are probably aware, there is a huge and maybe ever increasing global competition for exploration acreage.And then high-impact wells, when we did our strategy work in 2009, we kind of concluded that sort of we weren’t making very many high-impact discoveries if any over the last few years. When we started digging into this, we said well, it wasn’t really surprising, because we weren’t drilling hardly any high-impact wells either. And these are normally somewhat higher risk. You don’t find high-impact or don’t make high-impact discoveries on every other well. I guess, we have the last 18 months, but that’s not normal. The chance of success here is more likely to be one in five or one in six and it doesn’t mean if you drill five, you make one discovery or if you drill six, you make discovery, sometimes, you have to drill 10 or more in order to do that. And of course the reason we do this is to find higher volumes, but also to be exposed for the outlays, the ones with the really high potential. And if we think back over the last year what kind of surprises that we had? And I think the one big, big positive surprise for everyone was onsite. It was off-scale compared to what we expect and what anyone else expected. It was a much, much better reservoir than we thought everything was better. So, but – if you don’t take that kind of risk and you don’t get exposed for that kind of upside, Pao is really the same. It’s really the same, better reservoir quality and much larger hydrocarbon column than we envisaged and in fact a more favorable oil type even though associated with gas than we are there to envisage. And then the third point about exploiting core positions and on our total year before, this is all about maintaining or establishing robust portfolios in highly prolific oil and gas basins. Norway is obviously one of those. The Gulf of Mexico is obviously another. And I think we can safely say that we recognized from before that Angola is and Brazil I hadn’t added to the list, but I think I could probably add Brazil as a core exploration position for us to the fore which are noted here and Canada is, I guess, is already there, we have made a couple of discoveries and we have established a very significant acreage portfolio here.
So, that's what we mean by exploiting core positions. And the importance of this is sort of if you make a breakthrough discovery like we've done in Tanzania, Eni and Anadarko have done in Mozambique and hopefully getting BG and Tanzania as well. I think we just see what often it can lead to. It doesn’t lead to those single opportunities at least to a multitude of opportunities not necessarily in the same – same category – size category, but opening up this new place is one of the key things we do in exploration. And of course results have been very good six high-impact discoveries and as we speak we are drilling two or three more, where we expect we have to announce the results by the end of the second quarter. So, I think we can say we successfully implemented our strategy and we plan to stick with this and my team will tell me more and outline how we positioned that to deliver more. So, we think we are doing well.What do others think? Well, they think we are doing pretty well as – pretty good as well. If we look back and this was part of the work we did with the expiration strategy we look back to the period of 2006 to 2008. We actually weren’t doing too bad on volumes, but most of the volumes were related – most volumes were Norwegian volumes. There is nothing wrong with that of course, but most of them were also related to near-field exploration. We drilled up a whole bunch of near-field prospects, because our production hubs needed more oil and gas and of course these are also high value barrels. Read the rest of this transcript for free on seekingalpha.com