ceo karl johnny hersvik, 11 september 2024

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Aker BP is a focused oil and gas company, dedicated solely to creating value on the Norwegian Continental Shelf (NCS). And we certainly believe this is a winning strategy. Over the last 10 years, Aker BP has delivered over 20 percent annual shareholder return, and we are well positioned to continue creating highly attractive returns with low cost, low carbon production and profitable growth into the next decade.

The NCS will remain an important energy basin for decades to come. Numerous studies underscore that Norway still possesses vast, untapped oil and gas resources. The latest analysis from the Norwegian Offshore Directorate estimates that approximately 44 billion barrels of oil equivalent are remaining on the NCS, with approximately half of this yet to be discovered.

However, the directorate also points out that if exploration activity is low, and if the willingness to invest in new developments is limited, much of these resources will stay in the ground. Society will miss out on significant value creation, which could be as much as the equivalent of another Norwegian “oil fund”.

This is a topic I’m deeply passionate about, but in the interest of time, I’ll limit the discussion to three core reasons why the continued development of Norwegian oil and gas is crucial.

The first is energy security. Ensuring a reliable and affordable energy supply for a growing global population is essential. Norway’s role as a strategic supplier for Europe cannot be overstated.

While there are many scenarios for future energy demand, clear projections are often harder to find. One that particularly caught my attention was ExxonMobil’s recently published Global Outlook. The headline is that oil and gas is likely to account for 54 percent of the primary energy mix in 2050, compared to 56 percent today. Their projection shows that oil production naturally declines by about 15 percent per year, which means that without continued investment, the much-needed supply could virtually disappear. This analysis indicates that the world might need more oil in the future than we previously thought.

But this is not just about global demand. Oil and gas from Norway is critical for Europe’s energy security. Even as the continent transitions toward renewable energy, oil and gas is projected by Wood Mackenzie to comprise over 50 percent of the primary energy mix by 2040 — remaining a critical component of the energy supply. Simply put, Norway is Europe’s largest and most reliable energy supplier, and frankly, there are few viable alternatives in the near future.

Secondly, environmental impact. The environmental consequences of replacing Norwegian oil and gas production would be severe. The NCS has the lowest average emissions intensity globally, and a lapse in supply could lead to a net increase of up to 230 million tons of CO₂ emissions between 2024 and 2040, according to a recent study made by Wood Mackenzie for Aker BP. Even in the most aggressive scenario of achieving the 1.5-degree target, Europe will remain a net importer of oil and gas. Any shortfall in Norwegian exports would need to be filled by regions with much higher emissions from production and transportation. From an environmental perspective, maintaining a high level of production on the NCS is essential.

And thirdly, value creation. The E&P value chain on and around the NCS generates immense value—not only for the E&P companies but also for suppliers, local communities, families, and the nation. The substantial tax revenue from this sector is a cornerstone of Norway’s welfare state. In 2022, oil and gas companies contributed 84 percent of Norway’s corporate tax revenue. For Aker BP alone, our tax contributions exceeded those of all the 390,000 land-based companies combined. Let me make today’s understatement: It would be a grave mistake to allow this value to evaporate.

Now, let’s turn to Aker BP, and what role we play in this context.

Nearly a decade ago, we set out on a journey to transform our industry. We identified lots of waste in the value chains. Delays and cost overruns were normal. The cooperation between oil companies and service providers was far from optimal. The industry also lagged behind in digitalisation. Our goal was to address these issues and build a highly efficient, cost-leading E&P company — resilient to oil price fluctuations and capable of generating superior returns through the cycles.

Fast forward to today: We have well-established strategic alliances with our key suppliers across all major categories, including drilling, subsea, fixed facilities, etc. Through these alliances, we provide our suppliers with unprecedented visibility, enabling them to get involved early, plan ahead, and allocate their people and resources accordingly. The incentives are aligned based on win-win. The organisational model is simplified with clear responsibilities. Learning effects are being preserved inside the company. And all this is supported by a state-of-the-art digital ecosystem.

Today, Aker BP is producing well above 400 mboepd, with industry-leading metrics for production cost (below $7 per boe) and greenhouse gas emissions (around 3 kg/boe). We are in the midst of a significant, and in our view a highly attractive investment program, developing close to 800 million barrels of new reserves. This program includes the Yggdrasil development, the Valhall/Fenris project, and several tieback projects around our existing hubs at Alvheim, Grieg/Aasen, and Skarv.

In sum, these projects will contribute to growing our production to over 500,000 barrels of oil equivalents per day in 2028. And the economics are highly compelling, with an average break-even oil price of 35-40 dollars per barrel on an NPV10 basis, and with around 25 percent IRR (internal rate of return) and 1-2 years payback time at oil prices of 65 dollars. We are nearly two years into the execution phase of this investment program. Four of the projects have already been completed, including Tyrving in the Alvheim area which started production last week — 6 months ahead of schedule, and the rest of the projects are progressing according to plan.

Our ambitions go beyond the current projects. We have a vast portfolio of contingent resources which we aim to mature into new development projects, including the potential stand-alone development at Wisting in the Barents Sea, where we are targeting an investment decision in 2026, as well as several other tieback projects.

Exploration is also key to Aker BP’s long-term strategy. We plan to drill 10 to 15 exploration wells annually, with 80 percent focused on near-field prospects, and 20 percent on stand-alone opportunities.

And this is an area ripe for disruption. New imaging technologies, such as OBN, along with the introduction of artificial intelligence and machine learning, will significantly enhance our ability to analyse vast amounts of underground data and increase our exploration success rate. In this context, we have sent a clear message to the Norwegian regulators, to open up as much exploration acreage as possible.

In summary, we are on track to achieve the goals we set a decade ago. As one of the most efficient operators in our industry, we continue to push boundaries with the support of our alliance partners. The skillset we have developed has allowed us to turn previously non-commercial discoveries into profitable development projects. This also means that we have significantly expanded our opportunity set. We intend to keep leveraging this skillset to generate new profitable investment opportunities, whether in existing fields, through new exploration, or strategic M&A deals.

Aker BP is in the middle of a major investment portfolio on the Norwegian continental shelf. Together with license partners, the company is investing NOK 200 billion. Over 250 Norwegian suppliers are directly contributing to the development projects.

“At Aker BP, we are creating the oil and gas company of the future with low costs, low emissions, profitable growth, and attractive returns. The project portfolio gives us an outstanding opportunity to lead the transformation of the oil and gas industry. None of this would have been possible without the best suppliers involved,” says CEO Karl Johnny Hersvik of Aker BP.

At ONS, Aker BP gathers Norwegian suppliers contributing to the project portfolio for a grand celebration at the stand. Watch the broadcast (in Norwegian) live on Tuesday, August 27, from 10:30-11:00:  Rebels United: Storstilt feiring av norske leverandører til Aker BPs prosjekter (youtube.com)

Preparing the Industry for a future in new value chains

Aker BP started the execution of the projects Yggdrasil, Valhall PWP-Fenris, Skarv satellites, and Utsira High a year and a half ago. The Norwegian share in the projects is approximately 65 percent. The projects provide 150,000 man-years in Norway over the lifetime of the fields. About half of this is in the development phase. Hundreds of apprentices are completing their vocational training through the project portfolio. Over 250 Norwegian suppliers are directly involved, and these suppliers place thousands of purchase orders, with a significant portion going to Norwegian companies.

“We have promised Norwegian politicians to ensure activity, develop competence, and prepare the industry for a future in new value chains. For the industry to transition, we need activity. We see many good examples of our suppliers using these projects to increase competitiveness through better productivity, upgrades, technology investments, digitalization, and automation. Many are also positioning for work in new value chains. We are proud of this,” says Hersvik.

Projects are on track

Aker BP is among the oil and gas companies in the world with the lowest emissions and is uniquely positioned for further growth. Due to the project portfolio, along with a range of measures for increased recovery and efficiency, Aker BP expects to increase production to around 525,000 barrels in 2028.

“All our projects are on track. In the major developments Yggdrasil and Valhall PWP-Fenris, work is ongoing at all involved yards and locations in Norway and worldwide. Installation and drilling have started at offshore. We have reached this stage because we work closely integrated with alliance partners, strategic partners, and suppliers, and because we standardise to reduce costs and complexity across projects,” concludes Hersvik.

Lukas Mosser from Aker BP has been awarded the prestigious Arie Van Weelden Prize for 2024. The prize is awarded to a person under the age of 35 who has made a significant contribution in one or more disciplines within the geosciences.

It is EAGE (European Association of Geoscientists & Engineers) that awards the prize. EAGE’s justifies the award by saying that Lukas Mosser has been a pioneer in the use of artificial intelligence (AI) to meet geoscientific and technical challenges from pore to reservoir scale.

His work stands out for being genuinely innovative and significant, setting new paradigms in geoscience, particularly in the interpretation and quantitative analysis of geophysical datasets. Lukas Mosser has contributed to a number of new solutions in geoscience that are used commercially today.

The prize was awarded at the EAGE Annual conference, which this year is being held in Oslo. The conference gathers more than 6,000 participants from all over Europe.

Photo: Ronny Setså / GeoPublishing

The oil discovery was confirmed in May 2023 in the Yggdrasil area and is the longest exploration well ever drilled on the Norwegian continental shelf. The discovery was estimated to be around 70 million recoverable barrels of oil equivalent, increasing the total resources in the Yggdrasil area to over 700 million barrels.

Øst Frigg Beta/Epsilon won the Exploration Innovation Prize because innovative methods were used when they drilled horizontal wells that were several kilometers long. You can read more about the well here: Record-breaking well behind the Yggdrasil discovery  – Aker BP

Torstein Skorve was subsurface Lead for Øst Frigg Beta/Epsilon during the drilling operation.

– Drilling NCS’s longest exploration well would not have been possible without good cooperation between drilling and wells (D&W) and exploration and reservoir development(ExpRes). We have faith and trust in each other, which means that we challenge not only each other, but also accepted truths about what is possible to achieve in a well, says Skorve.

– In the Øst Frigg Beta/Epsilon well, both ExpRes and D&W saw a common value in long, horizontal wells. We at ExpRes saw for every meter we drilled that we found increased oil volumes for the Øst Frigg Beta/Epsilon project at the same time that D&W gathered important drilling experience ahead of production well drilling at Frigg Gamma Delta and East Frigg Epsilon, he continues.

Vice president of exploration, Olav Antonio Blaich mentions good support from everyone in the company as an important success criterion for the project.

– It is so great that we are recognized for pushing the geological boundaries and challenging the established truths. It is also particularly important that we work in a company that invests so much in exploration, and who wishes to support new and good ideas, he says.

The Exploration Innovation Prize was awarded at the NCS Exploration – Recent Discoveries conference on 7 May. The prize is awarded to a company, team or license group that has made an innovative technological contribution to the search for oil and gas on the Norwegian continental shelf in recent years.

On Monday and Tuesday this week, we organized a hackathon at our offices in Fornebu. Together with external partners from Cognite, Aker Solutions, Microsoft and Tietoevry, they sat down to solve industry-specific problems.

This time, the theme of the hackathon was Generative AI and up front there were almost 20 suggestions for use cases submitted by the organization. In the end, four of them were selected: 

Use case 1: Offshore rotation and emergency preparedness  

Is it possible to make a program that finds the best rotation of offshore personnel to minimize the number of people on board while ensuring sufficient redundancy of the necessary competencies.  

Use case 2: Design and verification copilot  

Can copilots be used to increase efficiency in design and verification of new facilities? For instance, find relevant requirements from specific standards or rules, verify that a design is in accordance with the requirements set out in a standard or rule, and also generate a design from a set of requirements? 

Use case 3: Root cause analysis  

Failures on equipment offshore lead to increased downtime and operational costs. To improve operations and mitigate future failures, root cause analyses (RCA) are conducted. Finding the root cause involves searching for relevant information from a vast number of documents. Is it possible to use generative AI to accelerate the search time, leading to more efficient root cause analysis, which in turn could reduce downtime and increase value outtake?  

Use case 4: Asset tag groups from image boundaries 

Can we use copilots to automatically generate asset tag groups from images with drawn boundaries? For instance, retrieve and group relevant object information based on tags identified in P&ID drawings. 

Read about our last hackathon here: Aker BP Hackathon 2023: A celebration of data science! – Aker BP

Intensive, but productive days

For two days, the groups were working on their use case, before presenting their research to the rest of the audience.  

– I had a great time coordinating the hackathon and it was amazing to see how we could use copilots to tackle real-world problems and create innovative solutions. In total we had over 50 participants coming from all over Europe, from 5 different companies, joining in for the two days, says Eirik Aasen, Digital Platform Manager for Microsoft in Aker BP.

Simen Eldevik, Data & Development Manager in Aker BP, was also impressed by the groups’ effort.

– I am very happy with the energy of the groups and the willingness to jump out in the deep end of the pool. None of the use cases we selected were easy – we selected them exactly because they were challenging and were relevant to the industry, he says.

This is an amazing format for intense knowledge transfer and learning on interesting industry challenges! 

This applies to the lunch and dinner menus being served by the ESS catering company to offshore workers on all Aker BP installations, and will take effect starting 1 May this year.

“There are a lot of good reasons for increasing the share of Norwegian meat on our installations,” says Georg Vidnes, SVP Operations in Aker BP.

“The quality of Norwegian meat is good and we believe it’s important to support Norwegian farmers with this initiative. We also know that Norwegian meat ranks lowest in all of Europe when it comes to the use of antibiotics. Using local suppliers is sustainable and, not least, it’ll help ensure reliable deliveries when the meat is delivered locally,” says Vidnes.

Aker BP has nearly 200,000 overnight stays offshore each year, where about 400,000 plates of hot food are served for lunch and dinner. Significant amounts of meat and other ingredients are required for these offshore meals. ESS will be implementing the change to increase the share of an important main ingredient, Norwegian meat, from 25% to 75% on lunch and dinner plates.

“Prioritising Norwegian ingredients in the meat category, from Norwegian farms, strengthens the local economy and helps maintain jobs in the districts,” says General Manager Offshore of ESS, Ivan Vågstøl.

ESS views this as a considerable investment in Norwegian food production and value creation for Norwegian agriculture and the food industry.

“The Norwegian farmer is the cornerstone of our food supply network, and we’re proud to help showcase them and their products for our offshore guests,” says Vågstøl.

ESS looks forward to continuing its cooperation with Aker BP to promote Norwegian food production. Fatland, Jæder and Prima will supply the Norwegian ingredients.

“We’re very pleased that Aker BP is choosing to go local and support producers and businesses in Rogaland, as well as eventually on the Helgeland coast, to a greater extent than before,” says Stian Blom head SAFE representative in Aker BP, who proposed the increase through the works council (BU).

A digital tool developed at Aker BP uses artificial intelligence to significantly streamline the work of exploring for oil and gas. The so-called ‘exploration robot’ does not put geologists and geophysicists out of work but helps to increase quality of the work and utilize available data in a far better way than before.

“Our principle is to use computers for what computers are good at, which is to find patterns in large multi-dimensional datasets”, says Aina Juell Bugge, Senior Data Scientist at Aker BP.

“Our goal is to use machine learning and generative AI as an aid when we interpret seismic data, by finding and flagging possible exploration targets and prospects, and to provide data-based assessments of uncertainty in interpretations as a second opinion, says Juell Bugge.

When you drill an exploration well, there are often years of work behind it, and not least enormous amounts of data. And precisely for this reason, a tool that uses generative AI will be able to contribute to a significant change in the way we work.

Exploration work starts with data. Both new data, but also historical data that may have been collected over several decades. A large proportion is seismic data collected from the area where we are exploring, but also from other parts of the continental shelf if it contributes to a better understanding. This is combined with data from well logs and core samples. When all of this put together it amounts to a scale and complexity that the human brain is unable to handle.

We have been using computers to store and process the data for decades. But with the possibilities that opens up with artificial intelligence, the contribution from computers rises to a whole new level.

“There is no risk of machines taking over the explorationists’ jobs. Quite the contrary”, says Peder Aursand. Aursand is a Subsurface Manager at Aker BP.

“With the ‘exploration robot’, we have simply created a co-pilot for the explorationists that helps free up time that was previously used for repetitive and labor-intensive tasks. This time can now be used for creative processes and better understanding of the underground. But it requires that we work in a different way, and that we have people with a slightly different type of expertise than we have had up until now”, says Aursand.

Process engineer David Edwards walked around the deck of the production ship Alvheim when a good idea sprung to his mind. Now this idea has been put into practice, saving the environment from significant emissions of greenhouse gases.

Greatly simplified, the solution consists of one pipe and two valves. And the result is that gas that would otherwise have been flared is instead sent by pipeline to the UK so that it can be utilized for house heating and boiling tea water (among many other things).

The challenge was linked to the well clean-up that must be done in new wells before they can enter regular production of oil and gas. There will be drilling mud and gravel in the well, and in addition the well will contain a special completion fluid which is necessary for the completion work. To wash this out, the well is run with as high flow rates as possible to a designated separator on deck. The gas from this process is vented out to the flare tower where it is burned.

Simple and ingenious solution
Some time back, process engineer David Edwards was walking on deck at the Alvheim FPSO. Then he sees the pipe that brings gas from the third-party separator to the flame tower. By turning his gaze slightly to the left, he sees the pipe system that brings gas from the producing well to the export pipeline.

“There and then I thought – what if we connect a pipe between the two systems so that we don’t have to burn valuable gas”, says Edwards.

The idea was quickly put into practice. Calculations showed that it was possible to implement, and if the manufacturing and installation happened at record speed, it could be ready for the start-up of the KEG (Kobra East Gekko) field, which was to be connected to Alvheim.

“We got the last parts for the system on board the week before KEG was to commence production, so there was no time to carry out test runs. So, you could say that the very first test was done when we put it into use”, says David Edwards.

“Then it is extra fun that the system turned out to work even a little better than the calculations suggested”, he says.

Significant emission cuts
With long multi-lateral wells, the clean-up process can last for several days. As a result, the amount of gas that is normally burned also becomes significant.

“We have now received real figures for the emission reduction from KEG. Although we have had some challenges with the compressors, they show that we have managed to extract 1 million cubic meters of gas, which would have resulted in CO2 emissions of 2,500 tons if we had flared it off, says David Edwards.

He also points out that the solution will be able to be used for future wells in the field, and that the experience and knowledge they are building up mean that a similar solution can perhaps also be installed in several fields.

“This is really what we can call a three-for-the-price-of-one”, says Edwards.

“We save the environment from emissions, save CO2 tax, and we get income from the gas we can sell.

Aker BP ASA is the Operator of Alvheim. Licensee is ConocoPhillips Skandinavia AS.

The Norwegian authorities are offering Aker BP ownership interest in 27 exploration licenses on the Norwegian continental shelf in the APA 2023 licensing round. For 17 of the licenses Aker BP is also granted operatorship. The award consolidates our position as the most active independent exploration company on the NCS.

“We are very pleased with the award that was announced today. It reflects our comprehensive application and gives us a foundation for maintaining our ambitious exploration strategy”, says Per Øyvind Seljebotn, SVP Exploration and Reservoir Development in Aker BP.

Aker BP is offered exploration acreage in all areas of the Norwegian continental shelf, the North Sea, the Norwegian Sea and the Barents Sea.

“Our strategy is to have a portfolio of acreage that provides a good balance between exploration wells close to existing infrastructure, and wells that can lay the foundation for independent developments if we make discoveries. For some of the exploration prospects, we are particularly targeting gas. It is more important than ever that Norway produce gas to secure the energy supply to Europe”, says Seljebotn.

APA – Awards in Predefined Areas, is the annual licensing round that includes mature areas of the Norwegian continental shelf. These are areas with known geology and a relatively well-developed infrastructure with production facilities and pipelines.

The award in TFO 2023 was announced by Minister of Energy Terje Aasland at the Oil and Energy Policy Seminar in Sandefjord today. 24 companies were offered ownership interest in a total of 62 licenses.

Aker BP contributes to the establishment of a kelp cultivation plant in the sea off Frøya in Trøndelag. The plant will remove CO2 from the cycle. Already in the summer of 2024, the first kelp will be harvested.

SINTEF Ocean will build and operate the kelp plant in the sea outside Frøya in Trøndelag County. The authorities have recently granted a license for commissioning.

During the growth period, the kelp plants bind CO2 through photosynthesis. The kelp will be ready for harvesting after 6-10 months in the sea. Further it will be processed into biochar through chemical processes. Tests will also be done on whether the kelp can be deployed on the seabed in deep water for permanent storage of CO2. In this way, kelp represents a climate-positive solution that quickly helps to remove CO2 from the atmosphere.

The plant is part of the Norwegian Kelp Center which will be utilized by several research projects, including the project ‘Seaweed Carbon Solutions’ which will develop and demonstrate a scalable technology for industrial kelp cultivation, with carbon capture as the main goal. The project is a collaboration between SINTEF, DNV, Equinor and Aker BP, with support from the Research Council of Norway. Recently, Wintershall Dea and Ocean Rainforest also joined as partners.

Norway’s long coastline is suitable for industrial cultivation of kelp. Calculations show that a kelp plant of only one square kilometer in size can produce 20,000 tons of kelp and by this capture 3,000 tons of CO2 annually. In addition to carbon capture, kelp and other macroalgae can be used in a variety of products such as food, animal feed, medicine, packaging, and fertilizers.

Big potential
The kelp plant outside Frøya will initially cover 200 acres and the first seedlings were recently deployed in the sea. The plan is to harvest at least 200 tons of kelp in the summer next year.
“We see great potential for this solution. 200 tons of fresh kelp will capture around 25 tons of CO2 and this is a solution that can easily be scaled up”, says senior researcher Jorunn Skjermo at SINTEF Ocean.