Hill+Knowlton Strategies

In the last week of August, the biannual Offshore Northern Seas conference took place in Stavanger, Norway. This year’s record attendance is testament to the boom in the North Sea market and the optimism of recent years’ major discoveries, but the boom also brings about challenges.

By Ola Bosterud and Henrik Arnestad Salthe

This year, almost 60,000 guests visited the trade show and conference at ONS – almost 10,000 more than in 2010. The visitors came from 109 different nations, and a total of 1,264 companies participated in the exhibition.

The atmosphere at this year’s ONS was extremely different compared with two years ago: gone are the somberness and talks about the oil and gas industry as a sunset industry. The recession depression has been replaced with eager chitchat about new discoveries and new business opportunities. The good mood is also penetrating the rest of Norwegian society, making Norway the odd one out in a world where recession and fossil fuel skepticism reigns. Even though a very large part of the Norwegian public is positive about the industry, there is still a strong anti-petroleum sentiment in parts of the public, especially on the far left of the political spectrum.

"Ocean Vanguard" - one of the drilling rigs that have been working on the Johan Sverdrup discovery. (Photo: HARALD PETTERSEN / STATOIL)

Massive discoveries
The reason for the change in mood is obviously the new discoveries made on the Norwegian Continental Shelf over the last couple of years. This includes the amazing Johan Sverdrup field, which was found in the most mature parts of the North Sea through applying new exploration models in pre-drilled areas. The field is expected to hold between 1,700 and 3,300 million barrels of oil, but the discovery is still being delineated and appraised to find out more about the total resources in place. Statistics Norway now predict record high investment levels in the Norwegian oil and gas industry over the next year, and their predictions for 2013, NOK 204 billion, are now the highest predictions ever, since Statistics Norway started predicting investment levels in 1985.

Even though everything is looking bright, history has taught us that the oil industry is a volatile industry. The slogan for this year’s ONS conference was Energy Paradoxes, and there are several paradoxes on the Norwegian Continental Shelf that the Norwegian industry needs to handle and that the international energy industry often finds puzzling:

• The public is very much pro-environment, and Norway has several strong E-NGO’s. At the same time, society is totally dependent of income from the oil sector
• Major discoveries have been made, but the industry still wants to open controversial areas to gain new acreage, to prevent the expected production drop after 2020
• The tax level for the oil industry is massive, but special tax breaks have fuelled a massive growth in the industry, resulting in tripling the number of E&P companies since 2000, from around 15 companies to close to 50 companies now prequalified for holding licenses.
• The Norwegian Continental Shelf is seen as mature, but major discoveries are still being made, and there are still large frontier areas that have not been thoroughly explored.
• Norway has steered clear of most of the Curse of Hydrocarbons, even though the population is small and hydrocarbons is a major driver in the economy.
• Norway has one of the world’s largest sovereign wealth funds, financed by income from the oil and gas industry. At the same time, the sovereign wealth fund’s investments in industrial players and oil companies have been controversial.

Trust is key
The industry is full of paradoxes, and the list could go on and on. What is true about all these paradoxes is that they need to be handled in the right way to win out both in the local and global competition for resources. In our view, the right way to do that is to be transparent about these paradoxes: about the challenges they present, as well as their opportunities. The oil and gas industry is dependent on the trust of their stakeholders. The only way to attain this is to earn that trust through being transparent and open, and communicating based on the facts.

About the authors:

Ola Bøsterud heads the energy and industrials practice in Gambit H+K in Norway. He has a long track record as Head of communications in various oil and gas related companies like  Petroleum Geo-Services, oil service company Aibel,  and Total Norge .

Henrik Arnestad Salthe is part of the energy practice group in Gambit H+K Norway, and works at the comapny’s Stavanger office. Before joining Gambit Hill+Knowlton Strategies, Henrik worked for several years as an oil and gas editor for various trade magazines and websites in Norway.