StatoilHydro Sees '09 as Year to Catch Breath, Increase Quality of Projects

"We must adjust our activity level and give critical consideration to which projects to focus on," said Gunnar Myreboe, StatoilHydro's Executive VP for Projects at the Offshore Strategy Conference in Stavanger, Feb. 10. The conference is an important meeting place for suppliers, who encountered different perspectives than just a year ago.

Projects will still have a high activity level in the next few years, but it will be more difficult for new projects to pass through the eye of the needle.

The reason is the change in framework conditions, among other things as a result of the low oil price and high cost level. Mr. Myreboe believes that this could nonetheless prove positive for the company, and he points out the opportunity it represents to improve quality.

"By shifting down a gear and being more selective, we will experience a renaissance in the quality of projects. We are also experiencing great understanding on the part of suppliers for consolidation."

He emphasised that it is the right projects and the important ones that are now proceeding, and that every single project must be reviewed to ensure its profitability.

Large Purchases

The industry has experienced a cost explosion in many areas of the supplier market, and annual procurements in StatoilHydro now correspond to roughly a sixth of the Norwegian national budget.

The figures for 2008 show that StatoilHydro purchased goods and services for NOK 123.3 billion. That is an increase of almost 17% on 2007. 84% of the total deliveries of goods and services came from Norwegian industry, while 16% came from international suppliers.

"This shows that the Norwegian industry is highly competitive," emphasises Mr. Myreboe.

Challenging Suppliers

With a strong industrial and financial platform and a sound financial base, StatoilHydro is in a good position to meet the challenges in the market.

As a leading player on the Norwegian continental shelf, the company is also responsible for ensuring predictability for suppliers, but it is important at the same time to take changed framework conditions into account.

"We must challenge the supplier industry on prices, efficiency and productivity, and it is also important to have updated contract strategies," he said.

Mr. Myreboe underlined that the biggest challenge at the moment is balancing short-term financial flexibility with the long-term strategy.
"This will be a very exciting year, a year that will give us a chance to catch our breath and increase the quality of projects," he concluded.