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Energy firms must cut unsustainable costs: Statoil CEO
Costs in the energy industry have become unsustainable, and executives must change current practices to grapple with a volatile price environment, the chief of Norway's largest energy company said Tuesday.
"What we have to address now fundamentally is the structural cost. We have seen a factor of three, maybe more, cost increases in the industry. It is not sustainable," Statoil (Oslo Stock Exchange: STL-NO) CEO Eldar Saetre told CNBC's "Squawk Alley" during an interview on the sidelines of the IHS CERAWeek energy conference in Houston.
Exploration and production firms must return to cheaper, more standardized ways of addressing cost base, billing and new capacity.
The only other way to cut costs is to scale back production activities, something Saetre said he would not like to do.
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Beyond its primary production area on the Norwegian continental shelf, Statoil is a significant player in the Gulf of Mexico and entered the United States' booming unconventional oil market in 2008, where it has aggressively invested in developing North Dakota's Bakken formation.
The company produces about 250,000 barrels of oil per day, and is expanding its output despite a prolonged slump in crude markets. The price of benchmark oil contracts has fallen nearly 50 percent since last summer, leading many producers to slash capital expenditures in order to protect their balance sheets and preserve dividend payments to shareholders.
Saetre said Statoil is confident that the current cost of crude is not sustainable and the company is planning for its long-term view that prices will eventually rebound.
"Exploration is a very long-term part of this industry. We need to think long term, so to cut back significantly on exploration is something I would not like to do because what comes out of exploration now is going to benefit us for the next decades," he said.
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Earlier on Tuesday, Statoil announced it would lead a partnership with Italian oil major Eni (Milan Stock Exchange: ENI-IT) and other rivals to explore blocks of the Barents Sea to be awarded by the Norwegian government in a coming licensing round.
Statoil appointed Saetre as CEO in February while he was serving as the company's interim chief after the departure of his predecessor, Helge Lund.
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