Having overcome many of the operational challenges of last year, we began 2014 in a stronger position to deliver on our priorities for the year ahead. Achievements we can be happy with as 2013 closed out include stable operated production and an upward trend of our entitlement production. Keeping the trend will be a battle for every barrel as we do not have major new projects coming onstream until late 2014, and we have major maintenance and safety programmes to execute in our Danish, Qatari and UK assets which will cause temporarily reduced production.


Our flagship projects, including the Qatar FDP 2012, Chissonga in Angola, and Culzean and Johan Sverdrup in the North Sea, all continued to progress through development milestones on schedule. In addition we have added exploration acreage in Kurdistan, where exploration work is now well underway - a good addition to our exploration portfolio.


The latest industry trends show a continued increase in both project costs and operating costs. Indeed, amongst our peer group of oil and gas companies we estimate that project capital expenditure (capex) has risen around 11% a year for much of the last decade.


There are many interlinked reasons behind why capex is being driven up, but top amongst those is increasing project complexity in general in the industry. The tasks involved in delivering our current portfolio of projects are themselves becoming more intricate and complex, which means the volume of work we have to do as an organisation to deliver them is increasing.


These factors together mean increasing our capital investments won’t necessarily correlate with higher returns further down the line. Ultimately our margins are getting squeezed, which means we have to continue to be smart to extract the most value from our capital allocations.


It also means that the encouraging momentum we ended 2013 and began 2014 with must be maintained to deliver value to the Group. It will not be plain sailing, but with hard work and sharper prioritisation we can deliver on our priorities. It will be a battle for every barrel, but it is an exciting one and it is one we are in good shape to win.






Jakob Thomasen