US Statoil Shale Technical Presentation Houston 2011-11-11

Classification: Internal 2011-08-11Classification: Internal (Restricted Distribution) 2011-08-02Classification: Internal (Restricted Distribution) 2011-06-09

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Development & Production North America

Shale gas business

Subsurface challenges and technology application

Michele O CallaghanVP Subsurface Development & Production North America, USA Onshore

m: +1 832 573 4686t: +1 713 918 8248f: +1 713 918 8290e: [email protected]

Visitor address: Building 4, 8th Floor 2101 CityWest Boulevard


Onshore USA is now large part of the Statoil DPNA Portfolio

Hibernia Terra Nova

Front RunnerLeismer

Marcellus

Discoverer AmericasMarcellus

Maersk DeveloperTahiti

Eagle Ford

Hibernia


Source: Morgan Stanley

• Abundant reserves

• Politically stable

• Open investment climate

• Established regulatory environment

• Existing infrastructure

• Access to service sector

• Public awareness/ familiarity

• Access to market

USA Marcellus & Eagle Ford - a good place for Statoil to start shale operations


Marcellus Activity in 2005 was limited to a few key players


74 operators now active in Marcellus play


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• Well-by-well focus

• Well defined decision gate phased approval process

• Significant geological risk 20-60% Pg

• Drill days 40 -200

• Recovery factors 40 – 75 % (gas)

• $80-200 mm per well

• System focus on clusters of 30-40 wells

• Frontline regular decision making

• Low geological risk 90-95 % Pg

• Drill days 20 - 40

• Recovery factors expected 20 – 30%

• $4-7 mm per well

Shale gas development programs are significantly different from conventional offshore

Conventional Unconventional


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Onshore shale production has specific challenges

• Environmental impact

• Complex operational logistics

• Variable contractual formats

• Mastering learning curve

• Multiple stakeholders

• Technology to advance efficiencies

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Classification: Internal (Restricted Distribution) 2011-07-21Classification: Internal (Restricted Distribution) 2011-07-12

8 - Classification: Internal (Restricted Distribution) 2011-07-128 -8-

Source Chesapeake Energy

How are hydrocarbons produced from shale?

• To reach the deep target gas, a vertical well is drilled

• The well bore is extended laterally to create a horizontal well

• The well is hydraulically fractured, allowing gas to flow

• At the surface gas is treated and enters pipeline network that take it to market

Detail Picture – source Chesapeake


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New applications of technology is what makes it all work

• Fraccing used by O&G Industry since 1940s

• Used in most natural Gas wells drilled in USA today

• Drilling technology improvements and efficiencies

− Longer horizontal laterals− Multiple-stage hydraulic fractures per

lateral

− Pad drilling

• “Micro-seismic” technology evolving, enabling even greater precision in fracturing wells

• 3D seismic coverage

• Proppant development


Classification: Internal (Restricted Distribution) 2011-07-21Classification: Internal (Restricted Distribution) 2011-07-12

10 - Classification: Internal (Restricted Distribution) 2011-07-1210 -

Hydraulic fracturing fluid – content disclosure is important

• Additives used include compounds common in many consumer products

• Fluid separated from aquifer by many thousands of feet of rock

• Freshwater aquifers are protected by multiple layers of protective steel casing and cement

Aquifer

Statoil supports disclosure

Approx 5,300 feet from surface

Water and sand: ~99%

Other: ~1%

AcidCorrosion InhibitorAntibacterial AgentScale InhibitorFriction ReducerGelling AgentBreakerSurfactant


Generalized casing design for well integrity

11 - Classification: Internal 2010-02-08

200 - 500’

350 - 1,200’

2,500 – 4,000’

To total depth

Illustration - not to scale

Statoil will utilize its experience in other geographical locations and engage the best industry practices and technologies to minimize the risk of gas migration

• Freshwater aquifers are protected by multiple layers of protective steel casing surrounded by cement

• Design administered and enforced under state regulations

• Shallow gas migration caused by disturbance of natural gas already present in shallow formations during drilling

• Chesapeake has implemented improved well design to address gas migration risk


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Applying Statoil technical and operational expertise to shale plays

Reservoir characterization

Fracturing and stimulation

Smart horizontal drilling

Production optimization

Excellence in HSE

Leveraging 40 years of technology development


Statoil vision as an operator in 2013 and beyond……

Classification: Internal Status: Draft

A profitable onshore player

Realizing upside fromtechnology & value chains

A HSE leader inonshore unconventional

developments

Perform as well or better than

comparable operators


Thank you

US Statoil Shale Technical Presentation Houston 2011-11-11

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