Statoil Shift to U.S. Shale Seen Deepening After Algeria Attack

Statoil ASA, Norway’s biggest energy explorer, could accelerate a shift toward U.S. shale investments and Brazil after last week’s terrorist attack in Algeria that left five of its employees missing, analysts said.

Poor security in North Africa could prompt the Stavanger-based company to focus even more on shale oil and gas in the U.S. and deepwater fields off Brazil, where most of the company’s production growth is expected to occur in this decade, said Trond Omdal, an analyst at Arctic Securities ASA.

“Statoil is in a shift away from high-risk areas,” he said in a phone interview last week from Oslo. “It will reinforce a trend, but a lot of this is already driven by macroeconomic factors such as a high oil price and technological advances.”

The 67 percent state-owned Norwegian company is expanding abroad to compensate for falling production from aging fields in the North Sea and to increase its production to 2.5 million barrels of oil equivalent a day in 2020 from about 2 million. Relying mostly on so-called unconventional resources, Statoil plans to increase output in the U.S. to 500,000 barrels of oil equivalent a day in the same period, from 166,000 barrels in the third quarter this year.

“We neither will or can let terrorism dictate our strategy or our choices,” Chief Executive Officer Helge Lund told a press conference in Stavanger today. “We have a responsibility to run our business and support daily operations.”

Investment Guidelines

“Much of the growth in Statoil will in the future come from North America, and maybe Norway to some extent,” Teodor Sveen Nilsen, an analyst at Swedbank First Securities, said in a phone interview. Although Statoil is present in seven African countries, including Libya, Angola and Nigeria, it isn’t planning major investments on that continent compared with other markets such as the U.S., he said.

Terrorist attacks such as the one on its In Amenas gas facility, in which at least 23 hostages were killed according to local authorities, may lead Statoil to change its investment guidelines by increasing risk premiums when evaluating opportunities in African countries, Sveen Nilsen said.

Statoil operates the In Amenas and In Salah gas fields in joint ventures with BP Plc and Algeria’s Sonatrach.

The attack will also highlight the comparative value and increase the attractiveness of assets in more “stable” countries such as Norway and the U.S., the analyst said. Statoil produced 1.165 million barrels of oil equivalent in Norway in the third quarter, which amounts to almost two thirds of the company’s total output.

Maintain Presence

Statoil probably won’t withdraw from Algeria or other countries in the region based on the In Amenas attack, both Omdal and Sveen Nilsen said.

Norwegian companies won’t shy away from engaging in foreign business, Prime Minister Jens Stoltenberg said in Stavanger.

“We will never abandon international activities as a result of terrorist attacks. On the contrary,” he said.

While Statoil has probably done its best to prepare, the company must now review all security and emergency provisions in high-risk countries where it’s present, the SAFE union said today.

“It has to lead to several concrete measures,” SAFE leader Hilde-Marit Rysst said in a mobile phone interview. “From the pictures in the media, there seems to be potential for improvements” in terms of outsiders’ access to the facilities.

The terror attack may also make it more difficult for Statoil to recruit Norwegians for positions in risk-areas, said another union, Tekna. The company will need to train and rely more on local labor, union leader Marianne Harg said in an interview with Verdens Gang.

“More people may choose to turn down such opportunities,” Rysst said.

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