Statoil defends its turf on Alberta’s oilsands

Norway’s Statoil ASA (STO-N, STL-O) has long been considered one of the world’s leading offshore operators, but lately it has turned its attention to Canada’s oilsands.

The company landed in Alberta in a big way back in 2007 via its $2-billion acquisition of the privately held North American Oil Sands.

The acquisition paved the way for Statoil to become a considerable player in the region. It now controls 1,129 sq. km of leases, with production coming from the recently commissioned Leismer facility at a pace of 3,500 barrels per day.

But those barrels haven’t come without obstacles. With Statoil being based in Norway and having the Norwegian state as its majority shareholder, it has attracted the ire of Norwegian environmentalists who condemn the company’s participation in the oilsands.

In fact, the country’s coalition government is in a dispute over the oilsands assets. One of its member parties, the Socialist Left, wants Statoil to pull out of Alberta altogether.

That sentiment is not shared by the coalition’s larger parties, such as the Center Party or the dominant Labour Party. Neither wants to get into the business of telling Statoil management how to run the company.

Still, pressure in Norway persists, and has seemingly intensified with the recent announcement of a large oil discovery by Statoil in the North Sea.

On Aug. 24 the company announced the third discovery of the year at its Gullfaks licence. The prospectiveness of the licence had Erik Solheim, a member of the Socialist Left and minister in charge of environmental issues, telling local newspaper The Dagens Naeringsliv that he hoped the new discovery would reduce the company’s need for new oil sources – the implication being that Statoil could afford to pull out of Alberta because the new resources are found closer to home.

As for the company’s position on the oilsands, Statoil argues that the world needs more sources of oil and that the oilsands represent a world-class resource that shouldn’t be ignored.

It has touted its environmental record and advanced technologies as the keys to making sure its operations function at the highest standards and make it a “good neighbour” in Canada.

That reputation was sullied recently, however, after it was hit with 19 charges related to contravening its water licence and giving false and misleading information on its drilling endeavours. The maximum penalty for each count is $500,000.

Rather than fight the charges in court, Statoil entered a guilty plea and will likely wind up paying fines in the millions of dollars. Official sentencing will be handed down on Nov. 21.

The company says the charges related to tapping various waterways without permission were for building ice roads during winter drilling. It emphasized that the charges were not connected to its Leismer plant.

Statoil was formed in 1972 as the Norwegian State Oil Company. With the Statfjord oil field discovery in the North Sea just two years later, the company had begun its journey into the big time of oil production.

From there Statoil has built-up an impressive project pipeline, and now has operations in 34 countries.

In 2001 the company began trading shares publicly, but the Norwegian government is still the majority shareholder with a 67% stake in the company.

The company’s shares enjoyed an impressive run from the time of their IPO, when they began trading in the US$6 range up until the crash of 2008, when they reached the low US$40 range.

In New York on Aug. 31 the company’s shares traded for US$24.09. They have moved between US$18.67 and US$29.67 over the last 52 weeks.