Enterprise Risk Management at Statoil

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Case Details:

Case Code : ERMT-025
Case Length : 14 Pages
Period : 2003
Pub Date : 2003
Teaching Note :Not Available
Organization : Statoil
Industry : Oil and Energy
Countries : Norway

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction

Statoil, Norway's oil and gas exploration, production, transport, refining, and marketing giant, operated in 25 countries.

Its upstream activities were concentrated on the Norwegian continental shelf (NCS), the North Sea, the Caspian Sea, Western Africa, and Venezuela.

One of the world's top oil producers, Statoil had proven reserves of 3.7 billion barrels of oil equivalent. It ran 1,400 service stations in Scandinavia and about 500 others in Ireland, Poland, Russia, and the Baltic states. The Norwegian government owned almost 81% of Statoil.

Enterprise Risk Management | Case Study in Management, Operations, Strategies, Enterprise Risk Management, Case Studies

Statoil managed the state's direct financial interest (known as SDFI) in oil and gas partnerships active on the NCS. It also owned the world's largest offshore gas platform, the Aasgard B off Norway's west coast. In addition, Statoil supplied electricity in Norway and Sweden.

Statoil had divested its exploration and production operations in the US, although the country was still a major market for the company's exports: Statoil shipped about 500,000 barrels of oil per day to the US and Canada.

It was also a major exporter to Asia. In 2002, Statoil agreed to sell its oil and gas assets in the Danish North Sea to Dong, the Danish state oil company, for about $120 million.

The company also agreed to buy the Polish unit of Sweden's Preem Petroleum, which owned 79 gas stations in Poland.

In 2003, Statoil sold its Navion unit to shipping group Teekay, for about $800 million. That year it also announced plans to acquire two Algerian natural gas projects from BP¹ for $740 million.

Background Note

To exert greater control over exploration and production of the NCS, the government of Norway set up Statoil in 1972.

A decade earlier, three geologists had visited Norway on behalf of Phillips Petroleum to apply for sole rights to explore on the NCS. The government initially refused drilling rights to foreign companies. In 1963, Norway claimed sovereignty over the NCS. Two years later, the government began to allow exploration activities. Phillips' major discovery in the Ekofisk field in 1969 prompted Norway to set up its own oil company. Statoil was formed in 1972.

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1] BP, formerly BP Amoco, is the world's No.3 integrated oil company behind Royal Dutch/Shell and Exxon Mobil. The company was formed in 1998 from the merger of British Petroleum and Amoco.