In 2012, Statoil advanced from actively preparing for an operatorship in shale gas and tight oil to actually operating tight oil and gas activities on the Bakken and Three Forks formations in the Williston Basin of western North Dakota and eastern Montana. [1] [2]

We will move towards operatorship of our shared shale gas and gas liquids assets with Canadian joint venture partner Talisman on the Eagle Ford formation in south Texas in 2013. We have an active partnership with Chesapeake Energy in the Marcellus formation in several states in the United States' north-east. Late in 2012 we acquired Marcellus acreage in Ohio and West Virginia that Statoil will operate.

Growing global

While the US initially led the charge to develop and produce shale and other tight rock formations, many other countries are now actively working to unlock their own shale gas and tight oil resources.

In 2012, Statoil farmed into its first shale exploration asset outside the US, joining Calgary-based Petrofrontier to explore for shale hydrocarbons in the Northern Territory of central Australia. In October 2012, we signed a deal with German energy company Wintershall that includes 49% stakes in two onshore shale exploration licences in Germany. [3]

Licence to operate

The development of shale and other tight rock formations resources depends on "whether governments and industry can develop and apply rules that effectively earn the industry a 'social licence to operate' within each jurisdiction, so satisfying already clamorous public concerns about the related environmental and social impacts", the International Energy Agency (IEA) states in its 2012 World Energy Outlook (WEO). [4]

Statoil is committed to developing these resources in a transparent and responsible manner. 

First and foremost, we follow all requirements for reporting to the appropriate authorities wherever we operate. We believe that the public interest is best served by promoting transparency. 

A set of operating commitments that describe how we strive to minimize our footprint is expected to be published at in April 2013.

We voluntarily support the disclosure of hydraulic fracturing fluid additives in th US through the Ground Water Protection Council and Interstate Oil and Gas Compact Commission's disclosure website ([5] We are establishing baseline knowledge of water quality prior to operating (see more in the Responsible water use section below).

We take extra precautions at our well sites by building double berms around the perimeters to contain potential spills.

Abundantly clear

The upsides to developing and producing shale gas and tight oil remain clear. Reserves are abundant and have the potential to be a significant energy source for many decades to come.

The recent rebound in US oil and gas production, driven by upstream technologies that are unlocking light tight oil and shale gas resources, prompted the IEA to project that the US will become the world's largest global oil producer by around 2020. [6]

Global natural gas resources are now estimated by the IEA to total 790 trillion cubic metres (tcm), or more than 230 years of production at current rates. "Unconventional gas accounts for close to half of the increase in global gas production between 2011 and 2035, its share of production rising from 16% to about 26%," according to the 2012 WEO report (page 141).

"Output in North America is projected to continue to expand, thanks mainly to shale gas in the US. Total US gas production grows from an estimated 650 billion cubic metres (bcm) in 2011 to 800 bcm in 2035, putting the US ahead of Russia as the largest gas producer in the world between 2015 and the end of the 2020s," the report states. [7]

Shale gas has had a positive impact on US CO2 emissions, as natural gas has replaced coal in power production.

Tight oil boom

Tight oil has become a major success story. In North Dakota, daily production reached a milestone of 660,000 barrels of oil equivalent per day (boepd) in June 2012. Output may hit 1 million boepd by 2015, according to Lynn Helms, director of the North Dakota Department of Mineral Resources [8]. Bakken accounts for 90% of the state's total oil production. [9]

Statoil operates more than 200 wells in the Bakken and produced 37,500 boepd during the third quarter 2012 - up more than 100% since 2011. Due to the oil boom, North Dakota has the lowest unemployment rate in the US, at about 3%. [10] There are many job openings in and around Bakken that cannot be filled. [11]

But as shale and tight oil and gas output rise, so do the challenges related to rapid growth. Public scrutiny of shale gas and tight oil development remains intense, and it has expanded from a focus on the well and completion process known as hydraulic fracturing to include the social and economic impacts of rapid industrialisation. "Full transparency, measuring and monitoring of environmental impacts and engagement with local communities are critical to addressing public concerns," states the WEO 2012 report (page 145).

Responsible water use

Competition for water resources and responsible water management practices are critical to our future licences to operate, especially as we position ourselves in dry areas like Texas and Australia, or very populated areas like Europe. "The availability of and access to water could become an increasingly serious issue for unconventional gas development," the 2012 WEO report states (page 501).

We are increasingly recycling all water used during Bakken drilling operations. Many shale gas and tight oil operators, including Statoil, are seeking ways to fracture wells and limit the use of water through recycling or an overall reduction in water consumption. We are increasingly recycling all water used during Bakken drilling operations. After being injected into the well, part of the fracturing fluid will return in the days and weeks that follow. The amount of fluid that returns to the surface depends on geological characteristics. Typically between 15%-40% of the fluid is returned. The rest of the water injected as part of the hydraulic fracturing process remains in the shale formation and may be produced over a long period of time. Returned (flowback/produced) water is returned for the entire production lifetime of the well.

Statoil Research & Development in Norway is currently running projects that focus on recycling flow-back water from the hydraulic fracturing process to reduce our water consumption. We are also exploring the use of low-quality water and produced water instead of fresh water. We are establishing baseline knowledge of water quality prior to operating.

Getting it right

The chemistry of the hydraulic fracturing fluids and its compatibility with reservoir conditions is the key to recycling.

"We are working on a number of relevant issues together with the Shale Water Research Centre, associated with Rice University in Houston. By understanding precisely which critical chemical compounds are in the water, we aim to optimise flow-back water and other salt water treatment for re-use," says Karl Johnny Hersvik, senior vice president and head of R&D in Statoil's Technology, Projects and Drilling business area.

To help improve the identification of water-related risks and responsible water management, Statoil participated in the development of two water tools in 2011. The Global Water Tool, developed for high-level portfolio analysis and reporting, was adapted for the oil and gas industry during a project led by the global oil and gas industry association for environmental and social issues (IPIECA) [12], and the Local Water Tool was developed by the Global Environmental Management Initiative (GEMI) [13] to perform site-specific water risk assessments. Both tools were used by Statoil in 2012 in connection with the evaluation of new business opportunities.

A new department at Statoil's R&D facilities in Porsgrunn, Norway, and Houston, Texas in the US is established to help find new water-related solutions. Extensive work is also being carried out at Statoil's corporate level to operationalise water management. The main focus is on clarifying our policy and governing documents regarding freshwater use and water resource depletion.

On the ground

Surface disturbances like increased vehicle traffic and construction are an inevitable part of industrial development. Statoil strives for solutions and works hard to reduce the impact of our activities on the surrounding landscape and communities. In Bakken, for example, we continue to build pipeline gathering systems to transport oil, gas and water to and from well sites, dramatically reducing the need for tank trucks.

Typically, each individual tight oil and shale gas well requires as many as 4,000 to 5,000 truck loads during its lifetime. That means congested roads, traffic safety issues and a lot of wear and tear on the roads. In the period 2009-2012, we have built 674 miles of of gathering lines and pipelines serving our tight oil and shale gas operations in North Dakota and Montana. This reduces truck traffic.

Multi-well sites

Statoil is upgrading its rig fleet to modern "walking" rigs that can drill several wells on one site without having to erect and disassemble the rig for each well, thus cutting truck traffic.

The new-build rigs are inherently safer and more economical. They have better handling systems for both BOP (blowout preventers) and pipes than the conventional rigs - including larger and more efficient pumps and moving systems that allow for multiple wells to be efficiently drilled on a single pad. Moving the rigs is safer and more economical, because less equipment needs to be handled on the rig moves.

Reducing flaring

We are reducing the flaring of associated gas and cutting CO2 and CH4 emissions at our tight oil and gas operations in Bakken by capturing and selling the gas, as far as practical, to regional distribution companies via the "ONEOK" pipeline gathering system. ONEOK worked on a project in 2012 to expand capacity by constructing new gas plants to accommodate up to 300 million standard cubic feet per day (MMscfd).

We expect that reductions in flaring will be achieved through our investments in extending the pipeline networks in our production areas from the Bakken and Eagle Ford formations.

Another key initiative currently being implemented to reduce flaring is the Bakken Flaring Reduction Roadmap. In 2012, this included measures such as the installation of vapour recovery systems (five have already been installed, and 33 have been ordered), the use of bi-fuel systems that allow for the use of lease gas to fuel rigs and fracturing fleets (six rigs already have such systems, and four were in use in 2012), the use of gas for pressure support for oil production from wells and the operation of a turbine generator that uses lease gas to generate and sell electricity to the grid. Moreover, a pilot mobile NGL recovery unit which captures liquids while flaring residue gas is underway.   

Good neighbours

Statoil wants to be a catalyst for positive social and economic development and to leave a lasting legacy in the communities where we operate. Many of the activities supporting shale gas and tight oil development and production take place at the local level. Statoil recognises that each community and setting where we operate has unique cultural, environmental, and economic characteristics. We seek to engage in open dialogue with the communities in and around where we operate.

We want to ensure that our presence has minimal negative impact. Meeting with, listening and responding to the concerns of local residents, representatives and state officials is an integral part of our approach to promoting sustainable shale gas and tight oil operatorships.

In western North Dakota, Statoil recently joined forces with five other operators and service companies to form "Energy Outreach Williston". This joint partnership will focus on three areas of contribution - providing financial support for community projects that may be experiencing funding gaps; engaging in and with the boards of local organisations serving the Williston community; and initiating, responding to and engaging in volunteer opportunities.

Statoil also helped to initiate "trash pick-up" days in Williston, North Dakota, which recently brought together 430 volunteers from various energy companies to pick up roadside trash resulting from the present oil boom in the area.[14]