CEO Helge Lund looking ahead on our 40th anniversary
Today marks 40 years since Statoil’s first general meeting. Establishing the company was a key element in developing a nationally based oil and gas industry.
The main political objective has been to ensure that the values on the Norwegian Continental Shelf (NCS) benefit the entire country. The tools have been clear division of roles between various players, respected principles of corporate governance, competition to promote efficiency and, for Statoil, a clear mandate of value creation.
Stable and predictable framework conditions formed the foundation for the development of both the NCS and Statoil. Good collaboration between the owners, the Board of Directors, management and employees has moved the company forward. The road has not always been smooth. Industrial development is associated with risk, and adversity is a source of learning. Without the ability and willingness to take on project and technology risk, Statoil would never have reached the position it enjoys today.
The importance of the oil industry for the Norwegian economy is particularly evident now, as large parts of Europe struggle with slow economic growth and high unemployment rates. The Norwegian oil industry employs more than 200,000 people and accounts for around 25% of the State’s annual revenues. In 2011, Statoil alone contributed more than NOK 130 billion to the community through taxes, fees and dividends to the Norwegian State.
Discussions are initiated focusing “life after the oil”. Perhaps there is more to gain by discussing how we can better apply the knowledge found in the industry to enhance expertise throughout society? The desire for a broader industrial structure is important, but it can scarcely be realised by curbing the very engine driving the Norwegian economy. Some key challenges must be addressed to keep this engine running strong:
Times with solid financial results must not be used to hide the need for improvement, increased cost-efficiency and stronger competitiveness. The NCS will continue to be the backbone of Statoil’s activities. But the shelf is changing. Old fields are being phased out, while new discoveries are creating exciting perspectives. In order to maximize the value of both new and mature fields, Statoil must constantly improve. This need is compounded by the fact that we are a part of an increasingly tougher global competition. The future will bring demanding processes and major change. Attempting to avoid these developments would be bad management, and not in line with Statoil’s mandate.
To continue value creation, technological- and expertise development for another 40 years, Statoil must become more global. We see that the company is a desirable partner, with sought-after values, expertise and technology. The opportunities of the future are often found in demanding areas. Technical, commercial and political risk must be balanced against the potential returns. Striking this balance is the responsibility of the company’s board and management. Against this backdrop, the importance of maintaining the established principles of corporate governance may become even greater than so far.
The world’s energy realities show that oil and gas will be key energy sources for decades to come. At the same time, sustainability is becoming increasingly important. Statoil built its knowledge base on development and production of oil and gas, and currently leads the world in energy efficiency and low CO2 emissions. The focus is on continuing this position, combined with a gradual build-up in the field of renewable energy. But exactly how this competence should be used to best serve the company is not a given, nor how we make the best possible contribution to solving the bigger question. These are important considerations the company will face over the next few years.
Since Statoil was founded in 1972, the State has stepwise developed its ownership. The stock exchange listing in 2001 and the merger between Statoil and Hydro oil and gas in 2007 were important to create an international energy company. The ability to handle risk, seize opportunities for growth and ensure future value creation is also linked to the company’s size. Safe and efficient operations, technology development, innovation and active exploration activity will remain the engines in Statoil’s development. But also in the future structural adaptations may be instruments to develop global competitiveness. The Government’s assessments in Storting Proposition No. 36 (2000) will still apply: «A number of different forms of strategic alliances can be envisaged, both with regards to the kind of projects, how cooperation is organised, ownership structure and perspective».
In the next 40 years, Statoil will be moving into new and demanding territory. The answers to tomorrow’s challenges are not to be easy, but will rather be shaped by our capacity for adaptation, reflection and a continued willingness to discuss the alternatives and dilemmas we face.
Strict requirements and high expectations to health, safety and the environment from the authorities and our stakeholders have given Statoil and the Norwegian oil industry a competitive advantage. We see no long-term conflict between the interests of our owners and society’s expectations. We must continue to deliver solid returns to our shareholders, while operating in a way that builds trust and understanding for what we do. The guiding principles and mandates should remain, but the content must be renewed and adapted to a new era.