Enterprise Risk Management at Statoil|Enterprise Risk Management|Case Study|Case Studies

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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Background Note Contd...

In 1974, a giant discovery was made in the North Sea's Statfjord field, and Statoil was given a 50% stake. A year later, Statoil began exploring for oil and gas, exporting oil, and commissioning its first subsea oil pipeline, the Norpipe, which extended to the UK.

In 1986, Statoil's gas pipeline system, the Statpipe, began transporting gas from the North Sea to the mainland.

Moving into retailing, Statoil acquired Esso's service stations and other downstream operations in Sweden and Denmark in 1985 and 1986.

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

In 1990, Statoil and BP teamed up to develop international operations. In 1992, Statoil acquired BP's service stations in Ireland. Statoil and Neste Chemicals (later part of Industri Kapital) formed the Borealis petrochemicals group in 1994.

In 1995, Statoil acquired Aran Energy, moving into exploration offshore Ireland and the UK. Statoil's projects in China and Azerbaijan went onstream in 1997. That year, Statoil spun off its shipping operations as Navion, partly owned by Norway's Rasmussen group.

It also contracted with Kvaerner to build a giant offshore gas platform for Aasgard field in the Norwegian Sea. The Aasgard field project resulted in cost overruns in 1999, again leading to a top management shakeup. CEO Harald Norvik, who had advocated partial privatization of Statoil, was replaced by Olav Fjell, former head of Norway's Postbanken.

As part of a major restructuring in 2000, Statoil sold most assets of US unit Statoil Energy. Political opposition postponed Statoil's plans for partial privatization, but the government proceeded with an IPO in 2001. In the process, it raised about $3 billion.

Risks in Capacity Expansion

Statoil's future production was heavily dependent upon its success in finding or acquiring and developing additional reserves. If it was unsuccessful, Statoil might not meet its production targets, and total proven reserves and production would decline and adversely affect the company.

Exploratory drilling involved numerous risks including the possibility that there would be no commercially productive oil or natural gas reservoirs. Statoil was exploring in various regions, including the Norwegian Sea, the Barents Sea and deepwater offshore Angola, where environmental conditions were challenging and costs were high...

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