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Joint Ventures – strong partnerships in the oil and gas industry

Searching for and producing oil and gas is a complex task. It doesn’t only require a lot of technical know-how, but also a great deal of investment – and a certain willingness to take risks. This is why joint ventures have long been common in our industry: Companies that are actually competitors on the market undertake the joint development of projects. How does this kind of partnership really work in practice? An OMV colleague and his partner from Statoil are here to explain.

By early July this year Harald Scheruga-Rosmarion (OMV) and Torolf Christensen (Statoil) had already attended around 15 meetings together. Since 2014 the two of them have had a common goal: Developing the Aasta Hansteen gas field in the Norwegian Sea, around 300 kilometers off the Norwegian coast. A mega-project and one that can only be realized in this form by a partnership of multiple companies: Operator Statoil (51%), OMV (15%), Wintershall(24%) and ConocoPhillips (10%) work closely together towards the goal of starting gas production in 2018.

 

What are the main reasons for stepping into a joint venture?

Harald Scheruga-Rosmarion: Our business is all about managing risks. When we enter into an exploration license there is naturally no guarantee that we will find oil or gas in the ground. Once hydrocarbons are confirmed it is about profitability. A joint venture is a way to spread this these risks. This becomes even clearer if you look at the current oil price development. The market is volatile and developing an oil or gas field costs a huge amount of money – you are happy to pay only a share.
Torolf Christensen: A good collaboration brings a lot of mutual benefits. Know-how is an important aspect. You might work with the same partner in other constellations, so everything you give in one project might come back to you in another one. OMV and Statoil are currently working together on several projects in this region, such as Gullfaks and Gudrun, or Wisting, where OMV is the operator.

A joint venture is a way to spread risk. This becomes even clearer if you look at the actual oil price development. The market is volatile and developing an oil or gas field costs a huge amount of money – you are happy to pay only a share.

Regarding Aasta Hansteen – what are specific examples of sharing know-how?

Harald Scheruga-Rosmarion: Statoil is definitely a major player here in the north. They have developed fields on the Norwegian continental shelf since the very beginning, so there is a lot for us to learn. OMV started its business in Norway ten years ago and has developed excellent subsurface and drilling knowledge – but the thing that was missing was experience in developing major offshore projects.
Torolf Christensen: For us as an operator, it was very important to be open and accept OMV’s position. They are taking a more and more active role, giving constructive feedback. They found their role in this partnership – which, of course, is a good thing for all of us. We are looking for meaningful partnerships.

A good collaboration brings a lot of mutual benefits. Know-how is an important aspect. You might work with the same partner in other constellations, so everything you give in one project might come back to you in another one.

Talking about feedback – how can we imagine the collaboration between four different companies in a highly complex project like this?

Harald Scheruga-Rosmarion: Statoil is the operator in this project and hence they are in the driving seat while OMV is in the passenger seat. Of course we need to be on top of what’s going on, and sometimes the level of details we ask for causes friction. But at the same time, we as OMV have to prioritize – what is key, what is crucial to know in order not to drown in all the detailed information. I think this is another thing we can add into the partnership: bringing in a ‘helicopter view’, thus helping not to get lost in details and always keeping the big picture in mind.

Is there something like a contract which sets the overall direction?

Torolf Christensen: The Joint Venture Agreement and its voting rules are aligned and defined beforehand. For example, Statoil owns the major share in this project but we can’t just do whatever we want. On the other hand, our three partners also can’t overrule us. Furthermore, there is the PDO, the Plan for Development and Operation. It was submitted to the Norwegian Ministry of Petroleum and Energy in 2013. It is a kind of ‘law’ all four partners are committed to.
Harald Scheruga-Rosmarion: Of course different companies have different strategies. And since it takes years from discovery of a field to production, it’s also clear that whole companies and their strategies can change. But projects like Aasta Hansteen are like a big tanker: you can fine-tune the course, but you can’t just make a U-turn. Transparency is a guiding principle here in the Norwegian culture. Most of the communication happens via a central web-based platform. Documents are shared, discussions held, and all parties, as well as the authorities, have access to this platform. This way of collaborating in a joint venture was rather new to me.

What about differences in company culture?

Harald Scheruga-Rosmarion: In my opinion, Statoil’s and OMV’s “DNA” have quite some similar genes. Both developed out of state-owned companies into private, listed companies. And from an intercultural point of view the Norwegian and Austrian culture go together very well. There is the same culture of dialogue, we are both used to the cold weather, the snow, the mountains…
Torolf Christensen: Yes, we are a good match. (laughs)
Harald Scheruga-Rosmarion: Unless you beat us in alpine skiing! (laughs)

How do you personally deal with the aspect of being colleagues and at the same time competitors?

Harald Scheruga-Rosmarion: It is clear that every partner has targets driven by their company’s strategy and these targets are not necessarily identical. But on a project level, you have to work together like colleagues, otherwise you won’t be successful. As I already mentioned in licenses like these, you are ‘married’ for quite a long time. We are talking about up to 30 or 35 years. There’s a reason it’s called ‘partnership’.
Torolf Christensen: I agree. Social moments are a part of the collaboration. If you want to work well together professionally long term, you definitely need to have a good tone. Regarding Aasta Hansteen, we are more or less only at the beginning of our collaboration. After bringing the field on stream, we might look for more gas in the area, discuss the tie-ins of other fields; we’ll have to find solutions that are mutually agreeable.
Harald Scheruga-Rosmarion: By the way – in a few minutes we will have a tough meeting to discuss the drilling costs. We most likely won’t be as relaxed as we are right now… (laughs). These discussions are part of our job too, and a good and stable partnership can take this. In the end, both sides know that we are working towards the same goal.

About the Aasta Hansteen field and project:

  • The field is located outside established infrastructure in 1,300 meters of water, 300 km from the Norwegian coast, north of the Arctic Circle in the Norwegian Sea. It was named after the Norwegian painter, writer and feminist Aasta Hansteen (1824-1908).
  • The field development includes a SPAR platform, which will be the first such installation on the Norwegian continental shelf. SPAR is a floating installation consisting of a vertical column moored to the seabed. It is currently being built in the Hyundai Heavy Industries Offshore Yard in Ulsan, South Korea.
  • Polarled is a new 480-kilometer gas pipeline from Aasta Hansteen to Nyhamna in Møreog Romsdal county. The pipeline facilitates the development of Aasta Hansteen and other fields in the Norwegian Sea.
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