bakken development: pathway to success, roadmap to a new tomorrow

Bakken Development: Pathway to Success, Roadmap to a New Tomorrow

Torstein HoleSVP US Onshore, Statoil, United States

Lance Langford, John Plappert, Kent Evans, Michael Thibodeau, Statoil, United States

Moscow, Russia | 15-19 June, 2014

Block 1: Exploration and Production of Oil and Natural GasForum: F04 – Unconventional oil and gas exploration and production

AbstractThe Bakken unconventional resource play located in the United States, (Williston Basin, North Dakota, Montana, and parts of Southern Canada) represents perhaps one of the largest oil deposits in the Western Hemisphere. Estimates suggest that 7 - 24 BBOE of technically recoverable resources lie within extremely tight reservoir rock sandwiched between organic rich “source” shales. Historically, companies have struggled to produce hydrocarbons in economic quantities due to the very low permeability and porosity characteristic of the Bakken formation. However the advent of new technology (horizontal drilling combined with enhanced hydraulic fracturing), favorable commodity prices, and a relatively continuous and predictable reservoir have rendered previously un-economic resources financially viable over an area covering approximately 520,000 square kilometers.

Today, numerous stakeholders are in an active stage of development with more than 200 rigs operating in the Williston Basin and over 6,000 horizontal wells drilled to date. With Statoil’s prowess as a technical forerunner, the achievement of increased production and reservoir optimization is a persistent goal.

In just six years, North Dakota’s oil production has grown from 100,000 BOEPD to over 800,000 BOEPD, as Statoil’s current Bakken production is on the path to exceed 50,000 BOEPD. Yet, approximately 70 - 80 percent of the wells required to optimally drain this resource remain undrilled. As such, despite meaningful achievements in total recoverable oil production, a significant opportunity for future innovation remains and substantial growth is expected.

Ultimately the future pathway to continued success in unconventionals will involve technological breakthroughs and advances in Improved Oil Recovery (IOR). Therefore; the roadmap to a new tomorrow starts with the global application of Bakken innovations and operational expertise to unconventional, liquids-rich reservoirs throughout the world.


Block 1: Exploration and Production of Oil and Natural GasForum: F04 – Unconventional oil and gas exploration and production


An unconventional journey

Forward-looking statementsThis presentation material contains certain forward-looking statements that involve risks and uncertainties. In some cases, we use words such as "aim", "ambition", "believe", "continue", "could", "estimate", "expect", "focus", "intend", "likely", "may", "outlook", "plan", "potential", "strategy", "will", "guidance" and similar expressions to identify forward- looking statements. All statements other than statements of historical fact, including, among others, statements regarding future financial position, results of operations and cash flows; changes in the fair value of derivatives; future financial ratios and information; future financial or operational portfolio or performance; future market position and conditions; business strategy; growth strategy; future impact of accounting policy judgments; sales, trading and market strategies; research and development initiatives and strategy; market outlook and future economic projections and assumptions; competitive position; projected regularity and performance levels; expectations related to our recent transactions, projects and discoveries, such as discoveries in the Bay du Nord prospect in the Flemish Pass Basin offshore Newfoundland as well as on the NCS; the termination of the full-scale carbon capture project at Mongstad; Statoil's interest in the OMV-operated Wisting Central oil discovery in the Hoop area; completion and results of acquisitions, disposals and other contractual arrangements; reserve information; future margins; projected returns; future levels, timing or development of capacity, reserves or resources; future decline of mature fields; planned maintenance (and the effects thereof); oil and gas production forecasts and reporting; domestic and international growth, expectations and development of production, projects, pipelines or resources; estimates related to production and development levels and dates; operational expectations, estimates, schedules and costs; exploration and development activities, plans and expectations; projections and expectations for upstream and downstream activities; oil, gas, alternative fuel and energy prices; oil, gas, alternative fuel and energy supply and demand; natural gas contract prices; timing of gas off-take; technological innovation, implementation, position and expectations; projected operational costs or savings; projected unit of production cost; our ability to create or improve value; future sources of financing; exploration and project development expenditure; effectiveness of our internal policies and plans; our ability to manage our risk exposure; our liquidity levels and management; estimated or future liabilities, obligations or expenses and how such liabilities, obligations and expenses are structured; expected impact of currency and interest rate fluctuations; expectations related to contractual or financial counterparties; capital expenditure estimates and expectations; projected outcome, objectives of management for future operations; impact of PSA effects; projected impact or timing of administrative or governmental rules, standards, decisions, standards or laws (including taxation laws); estimated costs of removal and abandonment; estimated lease payments and gas transport commitments are forward-looking statements. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described above in "Financial Risk update".

These forward-looking statements reflect current views about future events and are, by their nature, subject to significant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including levels of industry product supply, demand and pricing; price and availability of alternative fuels; currency exchange rate and interest rate fluctuations; the political and economic policies of Norway and other oil-producing countries; EU directives; general economic conditions; political and social stability and economic growth in relevant areas of the world; Euro-zone uncertainty; global political events and actions, including war, terrorism and sanctions; security breaches, including breaches of our digital infrastructure (cybersecurity); changes or uncertainty in or non-compliance with laws and governmental regulations; the timing of bringing new fields on stream; an inability to exploit growth or investment opportunities; material differences from reserves estimates; unsuccessful drilling; an inability to find and develop reserves; ineffectiveness of crisis management systems; adverse changes in tax regimes; the development and use of new technology; geological or technical difficulties; operational problems; operator error; inadequate insurance coverage; the lack of necessary transportation infrastructure when a field is in a remote location and other transportation problems; the actions of competitors; the actions of field partners; the actions of governments (including the Norwegian state as majority shareholder); counterparty defaults; natural disasters and adverse weather conditions, climate change, and other changes to business conditions; failure to meet our ethical and social standards; an inability to attract and retain personnel; relevant governmental approvals (including in relation to the agreement with Wintershall); industrial actions by workers and other factors discussed elsewhere in this report. Additional information, including information on factors that may affect Statoil's business, is contained in Statoil's Annual Report on Form 20-F for the year ended December 31, 2012, filed with the U.S. Securities and Exchange Commission, which can be found on Statoil's website at www.statoil.com.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot assure you that our future results, level of activity, performance or achievements will meet these expectations. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward- looking statements. Unless we are required by law to update these statements, we will not necessarily update any of these statements after the date of this report, either to make them conform to actual results or changes in our expectations.

Embrace transparency Stimulate new ideas

Execute with rigour Commit passionately to HSE


Our presence in North America

Beaufort Sea

Kai Kos Dehseh

St. Johns

Marcellus

Eagle FordGulf of Mexico

Stamford

Washington D.C.

Grand Banks

Anchorage

Houston

Mexico City

South Riding Point TerminalGrand Bahamas

Calgary

Bakken

Austin

Williston

Chukchi Sea

Statoil Office Statoil Asset

2013

2012

2011

2010

2008

2007

2004

1996

1987

Eagle Ford Operations

Marcellus Operations

Bakken 1st US Onshore Operations

Eagle Ford

Alaska and Marcellus

Oil Sands, Canada

Deepwater GoM

Grand Banks, Canada

Oil trading, New York


Statoil: premium portfolio in core onshore plays

Bakken Eagle Ford Marcellus


Unconventional reservoirs: how tight is tight?

0.0000001 D 0.01 D 1 D+0.1 D0.001 D0.000001 D

Permeability (Darcy)

ExtremelyTight

VeryTight Tight Low Moderate High

ConventionalTightTighter than tight

Eagle Ford, Bakken Marcellus

0.00001 D 0.0001 D

Very High

Norwegian Continental Shelf,Samotlor, Ghawar

Unconventional


~100m

Upper Bakken Shale

Middle Bakken

Lower Bakken Shale

Three Forks

Bakken petroleum system

~150km


150km

250km

150km

North Dakota Horizontal Drilling Activity

Source: IHS Enerdeq

Year 2006 – 150 wells Year 2014 – 8,800 wells

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 20100

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Bar

rels

per

day

Wel

l Cou

nt


1 2 3 4

5

6

2 First horizontal Bakken well (1987)

6 Oil production exceeds 1,000,000 barrels per day (2014)

5 First multi-stage, long-lateral (2009)

4 First lateral isolation using swell packers (2006)

3 First horizontal well with hydraulic fracture stimulation (2000)

1 First vertical Bakken well (1953)

North Dakota historical production and well countBAKKEN


Technical evolution

Images courtesy of CBP Engineering and Momentive

BAKKEN

Contact with the reservoir

Stimulation method

Proppant selection

Fluid systems


Vertical well, no frac

Reservoir contact area~10 square meters

Short horizontal well, no frac

Reservoir contact area~500 square meters

Single, uncontrolled frac

Reservoir contact area~10,000 square meters

Multi-stage frac


Improved multi-stage

Reservoir contact area~1,000,000 square meters

Surface area contact with reservoirLong horizontal well, no frac


Top view

Side view

BAKKEN


Frac Sleeve Stimulation Method Plug & Perf Stimulation Method

vs.

Stimulation methodBAKKEN Plug & Perf completions improve

wellbore-to-fracture connection and reduce pressure losses in each fracture

3 – 4 fracs per stage1 Frac per stage


Increased strength and conductivity

increased costs

despite

Higher recovery and profitability

yields

Natural Sand

Resin Coated Sand

Ceramic High Strength Particles with uniform size and shape deliver increased conductivity in the fracture system

Natural Sand with irregular shape and poor sorting in the proppant pack results in reduced conductivity in the fracture system

Proppant types and selection

Images courtesy of Carbo Ceramics, Inc., CBP Engineering, and Momentive

BAKKEN


Fluid types and characteristics

Images courtesy of Momentive

BAKKEN

Cross-linked Gel Fluid System

• High viscosity

• High proppanttransport capabilities

Slickwater Fluid System

• Low viscosity and friction pressures

• Less damage to formation

Hybrid Fluid System

• Slickwater initially, tail-in with Cross-linked Gel• Incorporates benefits of both fluid systems


2005 – 2006 Single, Uncontrolled FracCompletions

Frac optimization drives economic success

30km

BAKKEN

Williams County, North Dakota


Star denotes artificial lift installation

2009 First 20-Stage Plug & Perf CompletionWilliams County, North Dakota

Frac optimization drives economic successBAKKEN

30km


Conclusions and Path Forward

Apply best practices

Take risks and adapt quickly

Embrace new technology

Assess and monitor success around you

Design strategic evaluation projects (pilots)

Remain focused on how we deliver


Torstein HoleSVP US OnshoreStatoil, United States

Author BiographyTorstein has been with Statoil since 1985 and has held a range of operational and development roles in the upstream organization. More recently as Senior Vice President for Finance, Strategy and Business Development in Exploration and Production and, prior to moving to Houston in October 2011, the Senior Vice President of Operations South on the Norwegian continental shelf.