Statoil examined offshore operations, cut costs in half

(Kristian Helgesen/Bloomberg)

The Norwegian integrated oil company Statoil has cut offshore drilling costs from $70 per barrel of oil to $30 at a time when many deep water drillers are struggling.

Statoil CEO Eldar Sætre said at the CERAWeek conference in downtown Houston that offshore operations had grown complex. He wanted Statoil to cut it to its barest bones, “challenging everything on top of that, whatever it may be.”

About two-thirds of Statoil’s operations are on the Norwegian Continental Shelf in the North and Norwegian seas. Reining in costs offshore, which is much more expensive than onshore production, was key to the company’s success during the two-year-old crash in crude prices.

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“People thought deep offshore costs were immovable,” said CERAWeek chairman and host Daniel Yergin. “How did you do it?”

Sætre thought each well was unique. But he learned that, if Statoil broke drilling into parts, those parts could be standardized, and then industrialized, so the process could be repeated.

Costs will likely begin to rise again soon, Yergin noted. But Sætre argued that Statoil can’t relax, and must continue working to keep costs down.