Aker BP ASA (OSL:AKRBP)
Norway · Delayed Price · Currency is NOK 357.50
+4.80 (1.36%)
Apr 29, 2026, 4:28 PM CET
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CMD 2020
Feb 11, 2020
Okay. Good morning, everybody, and welcome to Aker BP's Capital Markets Day, this beautiful morning in Oslo, the Capital Markets Day of 2020. And also welcome to everybody on the web. As you've seen, we've upgraded the production a bit. Of course, in this day and age, we can't have poor performance to our web audience.
So let me give you a short introduction of today's agenda. First, you'll have to endure with me for a bit of time. I'll give you an overview of how I look at the total company, the direction. I'll have some comments on the macro. And I'll try to connect some reflections of why I believe Aker BP is ideally positioned to create superior shareholder value even in this current macro environment.
Then Kjelldeka will go through in more detail how we plan to maximize the value from our operated positions and how we plan to optimize growth in our assets going forward. And then, of course, Evi later on had a fantastic year in 2019, best performer on the Norwegian continental shelf in exploration. She will tell you how we plan to continue with that success also in 2020. And then finally, David, who actually marks his 1st year anniversary as CFO in Aker BP. So congratulations, David.
He will round it all off and tell you how we actually plan to maximize returns through the cycle. And then, of course, we'll end with Q and A. But as I look back on 2019, it's clear that 2019 was a really important year, both in Aker BP, but also in the energy industry as a total. 20 19 was a year marked by significant volatility, but more importantly, it was the year where the ESG topics moved from the sidelines and took center stage on the strategic development and the strategic agenda, both in oil and gas company and in the energy industry. In particular, CO2 emissions and climate change would probably remain center stage when it comes to strategic discussions in the energy industry in the remaining of this decade.
I am sure there is no doubt that this next decade will be a very exciting one for the oil industry and for our company. In Aker BP, we have always aimed for high efficiency, profitable growth and value creation. And a part of this is to reduce the waste and thereby increase value and reduce emissions. This has for a long time been a very clear priority and a part of our DNA. And so to speak, nothing has changed.
I will return to this in more detail in a few moments. But first, I'll start with a few thoughts on the macro environment facing the oil and gas industry today and why I believe, as I set out by saying, Aker BP is ideally positioned to generate superior shareholder value in the current challenging markets environments. As a point of departure and a statement that I believe most following the energy industry and the markets will concur with, This is currently a world with a monumental challenge, produce more energy and at the same time reduce CO2 emissions. The starting point is simple. Every day, enormous amounts of energy is consumed.
2019 was, in fact, the 1st year where we passed 100,000,000 barrels of oil equivalents used per day or actually oil barrels, not even oil equivalents. And while there may have been large changes in investor behavior in 2019, there's certainly no change in the appetite for oil. In fact, the growth over the last 4 years have been even larger than usual. Driving this energy demand is, to a large extent, 2 main factors: 1, a growing population, and over the next period of time, there will be more than 2,000,000,000 more people populating this planet. And of course, continued human and economic progress for everybody, implying strong energy demand over the next decades.
At the same time, we know that the CO2 emissions must come down in order to reach the goals from the Paris Agreement. The task is simply to make affordable, reliable, sustainable and modern energy resources available for all, as also outlined by the UN Sustainable Development Goals. This is no simple task, neither in execution nor in commercial terms. And it's obvious and an obvious fact that renewable energy will play an increasingly large role, and I am very big supporter of renewables. But renewables cannot do it alone, even under the most optimistic scenarios.
As an example, in 2018, the world consumed some 11,700,000,000 tonnes of oil. And to satisfy a growing energy demand and replace this volume within 2,050, we need to build more than 25,000,000 windmills, assuming a nameplate capacity of 5 megawatt and a 50% utilization. That equates to 2,200 windmills installed every day in the next 30 years, a monumental task in all respects. On this background, let's look at some of these oil demand scenarios. And as you can see, they vary significantly over the next decades.
On these slides, we have summarized a few of them. One of the most dramatic and most rapid energy transitions is outlined in the EEA Sustainable Development scenario. And this is a scenario to remind everybody that is fully aligned with the Paris Agreement. The stated policy scenario, on the other hand, reflects what is actually in the plans and budgets in the different governments and politicians of this world. This is what will happen if we don't do anything.
Even under the Paris alliance scenario, the decline from existing oilfields in the world is larger than any plausible fall in global demand, a fact that is further underpinned by the fact that U. S. Shale has come into the mix to a larger extent and that we have had a significant underinvestment in the last few years, which will lead to accelerated decline going forward. The simple conclusion to me is that significant investments are needed in upstream projects and for decades to come regardless of scenario. So if we dive further in and break down the energy mix, we see that today about 54% of the energy demand is covered by oil and gas.
In the stated policy scenario, oil and gas will have to cover about the same, 53% of the energy mix. And in this scenario, we would need to significantly increase our annual upstream in oil and gas investments from the levels we've seen over the last 20 years. And even in the sustainable development scenario, the EEA estimates that the world will need oil and gas investments of about US450 $1,000,000,000 each year for next 20 years or roughly at the same level that we've seen in the previous 20. Renewables will simply not be enough, especially if we want to ensure that use of coal is minimized. I believe on this context that the winners of the future oil and gas market will be the companies with the ability to lower emissions and to lower costs.
A transitioning world will need the most carbon and cost efficient barrels of oil to be produced, and this happens to be at the core of Aker BP's strategy as it's been for a few years already. Going forward, we are targeting an emission intensity of less than 5 kilograms per barrel. Compared to the world average, this is only about a third of the emissions. But remember, this is only covering scope 1 of our own emissions. We also remain firm on our target of pushing down cost per barrel to less than $7 and we're taking the first step in 2020, reducing it to $10 a barrel.
The sum of this strategy will create higher returns per barrel produced and better resilience to potential demand changes going forward. So the flip side of that picture, what is really demanded from oil and energy companies? First of all, let there be no doubt. Aker BP will take and are taking the climate challenge very seriously. I am convinced that the climate challenge can only be solved if the oil and gas companies are mobilized using the full scale of their technical and commercial capabilities and that the chosen solutions have a global impact on CO2 emissions.
In this context, let me be clear on Aker BP's most important contributions as a pure play oil and gas company also going forward. First, we want to return high value, the value we create to our stakeholders, produce as efficiently as possible to maximize value of oil and gas resources to owners and society and thereby underpin the transition. Investments in Renewable is not a part of Aker BP strategy. It does not fit our business model, it does not fit our capital structure and it generates significantly less returns than the current alternatives. However, our owners are likely to be better equipped to redeploy the capital generated by Aker BP in other sectors and as such, turning revenue generated by Aker BP into a fundamental part of the solution.
2nd, we are committed to reducing our emissions from operations, and I'm surprised by the amount of reductions which can be achieved using, for example, digital technologies, which have a limited capital exposure. We will continue to push hard to reduce waste in our operations and thereby improving energy efficiency. And we will willingly share both data, algorithms, expertise and know how with anybody interested to make sure that the impact on a global scale is as large as possible. Kjetil will cover this topic in more detail later. And thirdly, the energy transition is not just about producing energy.
It's about how we generate new industries and new business opportunities. Aker BP, together with our main owner, Aker, is determined to play a central part in this part of the puzzle as well. And let me mention 2 interesting examples. One is our participation in the creation of Cognite, now maybe the most interesting industrial software company, at least in Norway. Born in oil and gas, but with technology and competency far more generally applicable.
Secondly, is the establishment of the Center for the 4th Industrial Revolution with a global focus on ocean and environment, established by the World Economic Forum in collaboration with the Aker Companies. The objective is to share data, distribute knowledge and execute projects with a tangible impact on ocean and environment. On this background, I am sure I am confident that Aker BP will remain relevant and a fundamental part of the solution going forward. And I think this is the backdrop for me saying that we are ideally positioned to generate superior shareholder return. Now let's leave the macro environment for a while.
I'm sure there will be plenty of discussions about this later and focus on Aker BP. Not everybody knows Aker BP, of course, they should, but not everybody does. So let me take a minute to walk you through our position, achievements and goals and also state a few key facts about the company, especially for those of you that are new to the story. Our vision is simply to create the leading independent offshore E and P company. This is a continuous journey.
And while I think we have a lot to show for already, there's more than enough road left ahead of us. We have been fortunate enough to deliver an annual shareholder return since 2016 of above 50%, which I also think is pretty unique to this space. We have 2P reserves and 2C resources of 1,840,000,000 barrels of oil equivalents, giving us a resource life of more than most almost 25 years at to those production levels. That means we have more than enough food for our growth trajectory. And in 2020, we plan to produce between 205,000,220,000 barrels of oil equivalents per day at a production cost of about $10 a barrel and CO2 emissions of less than 5 kilograms per BOE.
Our dividend policy was outlined in the Capital Markets Day last year and remains firm. In 2020, the company proposes to pay $850,000,000 in dividends or $2.36 per share. This is $100,000,000 more than we paid in 2019. I set out in this presentation by saying that the next decade will be uniquely interesting will be a uniquely interesting one. I truly believe that.
However, standing here today, it's tempting to also look back because the last decade was not that bad either. The Aker BP company we see today is completely different from what it was only a few years ago. Since I joined the company back in 2014, we have grown our production from more than 10 times from 15,000 barrels on average in 2014 to more than 200,000 barrels today. It's been a remarkable growth story, both in terms of production and reserves. The growth has come from mergers and acquisitions, from organic projects, from project execution and from lifting production from our existing fields through IOR measures.
As we will speak about later today, this is only the beginning of the Aker BP journey. Our 5 operated assets from Valhall and Ula in the south via Ivar Osten and Alvheim to Sklar in the Norwegian Sea, in addition, of course, to the giant Johan Sverdrup field, is a perfect breeding ground for different assets to learn from each other, generate new ideas, new technology and future business opportunities. As we have moved along, I'm proud to say that we have improved in all corners of the company, but the building blocks have remained the same and will continue to do so. The 4 improvement pillars, lean operations, removing waste in everything we do, reorganizing the value chain, driving digitalization and retaining a flexible and entrepreneurial business model will remain the cornerstones in our improvement strategy also in the years to come. And we really do things differently in Aker BP.
We have gone from a traditional cost focus in 2014 to digitalizing our operations and setting up an alliance model with completely reorganized value chains in 2019. In 2020, we are ready to take the next step and will roll out in the new way we plan on running operations. Our one team operating model building on years of learning from a large number of change initiatives. Cjal Digre will explain this in more detail, and he means serious business. We have already set out some really challenging and ambitious targets for the next few years.
And even more encouraging, we have seen that it can actually be done. In 2020, we will also reorganize our digital initiatives and launch what we call Eureka X, which is a structured way of taking the entire Aker BP into the digital age. I'm also proud to say that our improvement agenda is an enabler for improved safety, reliability and efficient operations. And as I've said many times before and will say again, health, safety, environment, security, it's always been the number one priority for Aker BP. We've dedicated we're dedicated to significantly reduce our environmental footprint going forward.
Power generation offshore accounts for roughly 95% of our CO2 emissions, and we believe that great improvements are possible through energy optimization efforts. Our Skav asset is our testing base for this and really good examples have already been achieved. Kjetil will describe how we've been able to reduce CO2 emissions by more than 25,000 tonnes at Skav in 2019 with little or no capital being deployed. During 2019, Aker BP was also included in the FTSE for good global FTSE for Good Index. This is a global sustainable investment index series designed to identify companies that demonstrate strong ESG, environmental, social and governance practice measured against international standards.
Our strategy has remained firm for several years and are built around 3 well known pillars. We have no plans of changing this strategy and we perceive it to be successful and robust despite the significant volatility we have experienced since it was established in 2015. I'm sure you are aware of what these pillars are: execute, improve or grow. The mantra is simple: If we can't put an activity in either one of these boxes, we simply don't do it. And we are of the opinion that this is a series of topics that have served us well, both in good times and in challenging times and is still a fantastic base for communication with the organization and for clarity of purpose.
On this basis, we have executed our operations with excellence and with top quartile production efficiency. We have laid the foundation for an increase in production levels of more than 70,000 barrels of oil equivalents from 3 large development projects. Aker BP was the number one explorer on the Norwegian continental shelf in 2019, a fact that was not obvious back in 2014. And we have set many new drilling records. 1st dual drilling operations from the Stavanger deep sea Stavanger Odfjell.
We drilled a nautical mile in 13 hours and 38 minutes. That is almost 140 meters an hour. This is basically telling us what can really be done if you put your mind to it, an incredible performance by our alliance partners and other suppliers that work together as one integrated team, the one team thinking, coupled with a fantastic drilling rig from Wodgiel. We have also successfully stimulated wells at Valhall using single trip multi frac technology, and we are the 1st company in the world to do this offshore. We will explain the implications of this success in more detail later.
With a high performing team, strong capital discipline through the year, we have been able to say that we reach our targets set out in the Capital Markets Day in 2019. Regarding production levels, we carried at a very narrow interval in 2019. And despite major maintenance and turnaround activities during the summer, we were able to deliver on this interval. Production came in at 156,000 barrels of oil equivalents. And we entered 2020 producing more than 200,000 barrels of oil equivalent per day.
CapEx, expects, OpEx, production costs, no, it's not a POEM. It's basically what we use to generate value. They all ended in line of what we guided for. And we have, of course, paid $750,000,000 as we set out. Our improvement agenda in Aker BP is structured around the following 4 pillars: executing our core operations through partnerships and alliances digitalizing our operations from cradle to grave, driving up efficiency in the whole value chain Removing waste from our operation using lean as our operations philosophy and last but not least, efficient decision making is totally dependent on an entrepreneurial, flexible organization.
As I did last year, let me run through some examples of each of these improvement pillars. As I've said over the last few years, and I'm sure you're pretty bored saying me of me saying this even more, We have been forming long term relationship with our most important suppliers consequently throughout the last few years. We started out with the Subsea Alliance and today we have alliances covering drilling and wells, modification, asset integrity, field center, wellhead platforms, you name it. In fact, in 2020, 95% of our capital expenditure will run through 1 or more of these alliances. For us, alliances is not just a piece of paper.
It's not just a contract. It's about creating one team where Aker BP will take on a dual role. We are still the customer and the overall responsible as the operator. However, we are moving both scope and delivery resources into the alliance teams. The foundation is simple.
It's a shared belief that this new way of value creation is sustainable. And of course, alongside customary commercial and technical evaluation criteria, verifying that we are aligned on how to create value for all parties has been the key in identifying the right partners in these alliances. By removing waste, for instance, interface engineering, which there is an abundance in this industry, we are delivering significant cost improvements. At some of the Subsea Alliance project, we have delivered 20% to 40% reduction from plan to actual development. There is no doubt in my mind that this is the way forward for the industry.
And we're happy to see that oil, oil and gas companies are doing the same. In fact, Aker BP never invented this model. We stole the idea this time from the automotive industry. Digitalization has played a large part in our strategy in the past, and it seemed to be on everybody's mind and everybody is talking about it. But in Aker BP, we are determined to lead on this topic.
1st, as a reminder, and since everybody seems to be talking about it, but nobody seems to be able to define it, digitalization is the improvement of Desnys processes using digital tools. So that means just going software doesn't really mean you have improved your business processes. Digitalization has progressed rapidly from the first experiments in 2016 to a structured approach to digitalize the entire company in 2020. And with our collaboration with Cognite and the utilization of CDF, Cognite Data Platform, our open data sharing platform throughout the company, we have been given a competitive edge. In 2019, Aker BP in collaboration with our partners, and there are many of them, developed 41 solutions to real life business problems, 31 of which will be turned into products.
The key learning is that digitalization is not only about the tech. It's really about how deep industry insight meet deep technical knowledge and are able to collaborate and share the competency. And we're starting to see fundamental value creation, not only in stand alone projects, but throughout the value chain. A few examples. We are currently implementing the first robotic system for digital well planning, cutting digital well planning time from weeks to days, both in terms of geological and the engineering side.
We're implementing predictive maintenance on equipment such as multiphase pumps and other equipment series, both on Eula and on Ivarossen. And we are using machine learning to optimize production. Model predictive control is already running on Eberosen, controlling the export and the water injection. We're using flow implementation on Alvheim to minimize the loss across that subsidy spread, And we're about to implement BestDay, a tool identifying how far we are away from the ideal operating conditions on all fields. Digital worker is something we talked about for a long time.
It's now a reality on most of our fields. And with our one team operating model, it will be a reality on all fields. And of course, there is the implementation of robotics and other types of unmanned vehicles, aerial and waterborne, and we'll see some examples later on. And finally, in 2020, we're taking next big step and roll out Eureka X, expanding the Eureka program from a digital lab to all corners of Aker BP. I'm confident that as we look back on 2020, we will note that this was the year that the digital technology changed the asset heavy industries.
In addition to driving up efficiency through operational improvements, Aker BP will continue to pursue profitable growth opportunities organically for our resource base and for the drill bit, but also inorganically for mergers and acquisitions. We're in a really good position to take advantage of the 931,000,000 barrels of oil equivalents of 2C Resources. And we've been disciplined when it comes to growth, both in terms of organic and inorganic issues. From 2014 and onwards, and just as a reminder to everybody, Aker BP has developed for a series of transactions followed by subsequent investments, turnaround and or change projects. One example is Alvheim, where more data collection, drilling of geopilots, seismic and processing, drilling of infill producers has resulted in a series of new tie backs and significantly increasing resources, production and ultimately share value to all shareholders.
Another example is Valhall, where we accelerated and improved the Valhall Fenk West project utilizing 4 different alliance models, commenced drilling on the field center, stepped up on maintenance and initiated programs to revisit development of both lower HOD loaded tool formation that we're producing from every day and the shallower Miocene formation. And the story goes on. While learnings are plentiful and not all efforts have been successful, we remain disciplined and focused on the strategy and the criteria we set out in 2014. However, it's tempting to sum up 6 years of active M and A. And in my mind, there is one factor that is more important than the rest, and that's the quality of the asset being acquired, regardless of whether it is an actual oilfield or a company.
This means in total that we will stick to our criteria for M and A, but going forward, focus even more on the quality of the assets being acquired. Before I give the floor to Kjetil Dijkren, I'm sure you're happy to know that I'm getting towards the end. I will sum up my part by outlining the production ambition going forward. This illustration of Aker BP's resource base can be used to tell many good stories, and I'm really looking forward to going on tour with this slide in the back of my pocket. The 2P reserves, we have already invested in and are already producing in the assets.
Most of this is coming from our 5 operated hubs, plus, of course, Johan Sverdrup. The 2C resources represent discoveries that have not yet been through a decision to invest and develop and provide a solid basis for future organic growth. Nearly 2 thirds of these discoveries are located within reach of our existing hubs and are being managed as an integrated part of our strategy for each hub, the so called area development strategies. And around onethree of the Tuzi resources are concentrated in the Nuaka area, which I'll come back to later in this presentation. It's also worth mentioning that most of these resources, in fact, approximately 75% of these resources currently as it sits today is compliant to the $35 breakeven and many of them are not even at the DG3 level.
Working on these resources, we get the following production outlook. From production level last year, we have the potential to almost triple production with Noaca coming in stream sometime late 2025. But even without Noaca, there's a production increase of about 10% in terms of CAGR for the next few years. We will see substantial organic growth coming from a large portfolio of smaller, non sanctioned, but really profitable projects. And keep in mind, there is no upside in exploration or M and A in any of these figures.
These are only projects that are sitting in our hopper and has a name. I'm sure it sure is exciting working in a company with such growth opportunities. And not only exciting, the ultimate goal is, of course, to be profitable and to return value creation to our shareholders using the following dividend plan going from $850,000,000 in 2020 to $1,150,000,000 in 2023. The strong cash flow from our existing portfolio is the basis for this dividend outlook. And with a strong balance sheet and superior value creation through the cycle, we're ready to go after profitable growth opportunities as well as for covering this dividend curve.
Everything done with strong capital discipline and cost focus in mind. To sum it all up, Aker BP is all about high efficiency, profitable growth and superior value creation. And I hope I by this have illustrated how Aker BP even in the current challenging environment and even its remaining at the pure play oil and gas company is ideally positioned to continue to create superior shareholder value. I'm talking about value creation. There's probably no better example of superior value creation than the giant and fantastic Johan Sado project managed excellently by our operator in Equinor.
We are fortunate enough to have in our team one individual who has really put his mark on the Johan Sverdrup field development. In fact, he is so closely associated with Johan Sverdrup that we sometimes forget his name and just call him Johan. I give you the former Mr. Johan Sverdrup, now Senior Vice President of Offshore of Operations and Asset Development, Terl Digger. Thank you, Karl.
I'm actually quite happy with that name, and I'm really proud to be part of that Johan Saldrup team. It's not an everyday task that we took part of. And I think that we actually solved it in a not so normal way. And there's some important reflections around that for me. I think we were extremely brave in some of the decisions we took in the early stages of Johan Sverdrup.
An example is when we actually decided to go for this single lift installation of topsides using the world's largest installation vessel, the Pioneer Spirit, it was not completed, but it was a prerequisite for completing the on-site in 2019. Another area is that we had our problems, but there was some there was an impatience and a sense of urgency when we were solving them. That really is the 2nd most important success criteria. And then finally, we did that in a new way of collaborating openly amongst the owners, but also between the contractors and ourselves. So all of these Sverdrup success factors resonates very much with the strength I see within Aker BP.
I think we are just as brave. We have an extremely impatient color, and we are forward leaning and thinking out of the box. And this makes us a front runner on so many of the important areas for this industry just now. For instance, how we are opening up and collaborating around our data and how we are in these alliances that Karl mentioned, really challenging ourselves on which role to take and how to create more value by breaking down the silos. So this and the way we performed in 2019 and the way Karl thinks about 2020 and the ambitions going forward, obviously then translate into my clear goals and priorities for my area of responsibility.
And it starts with safety. The safety goal has to be 0. No one shall be seriously injured or harmed permanently when operating and working for Aker BP. And we are going to have perfect control over our systems and barriers to avoid the major accident risks. Secondly, we use our technology and digital insight to be a lot more conscious about operational setup and opportunities we have to reduce emissions.
In 2019, we had 7 kilos per barrel of emissions, and we're reducing this to 5. Thirdly, we are working constantly to improve our operating efficiency. And in 2023, we will be at $7 per barrel or below. And production efficiency. As Karl mentioned, in 2019, we were around 92%.
We want to increase that. And if you look at the Q4 of 2019, we were actually close to 96%. So if you were properly with the year and the type the things like turnarounds and unplanned downtime, we will be able to raise this and our aim is to be at 95%. And this requires both production optimization and operational excellence and discipline in the organization. And then finally, we are going for the robust opportunities and using $35 breakeven as a hurdle rate for maturing and sanctioning our opportunities.
And by doing this, key to delivering is the 4 pillar improvement program that Karl mentioned. And to me, it's such a strength that both that and the strategy, the fee for the strategy has stood stable in now 5 years. This is an excellent predictability and horizon to work with for the Aker BP organization. And if you look at how we want to drive operational excellence, one key thing for me is to actually link these initiatives across and get them out in the sharp end as Karl mentioned. And to do that, we have established improvement agendas clearly for each individual asset, and we are integrating the initiatives in that.
And we're also defining front runners. So everybody has not doesn't have to do everything, but we have clear front runners that are leading the way on specific topics. That means that Skar, for instance, is leading the way on robotics. And in the other end, Ula is trying to be more practical on developing the lean methodology. And then on the line side, again covered by Karl is we are really delivering the scope on these 7 different alliances within drilling, within projects and asset integrity.
But on one side, we are also working on improving the model itself, getting and scrutinizing the drivers that we have in common and also looking at the way that we are collaborating. And one important thing there, when removing silos and avoiding double dipping, as Karl said, is to look into our roles. How do we make this truly 100% complementary to avoid waste? And then thirdly, digitalization, very well covered by Karl, is changing Aker BP every day with the way we mobilized and the way we have raised the competence level in this company, it's extraordinary. And I can tell you, it's a lot to learn if you just suddenly start into this Aker BP company to pick up with the rest of the guys.
And my focus now is to mobilize the other part, the sharp end, both to implement achievements and solutions so far and start harvesting value, but also to be a lot clearer on what type of solutions and problems we want to solve. So we'll be a clearer customer internally for the Eureka X program to develop new value adding methodologies. And then on flexible models, business models, we have in 2019, it's an example, we've been maturing the collaboration with Trammo. And just now, we are at the breaking point where we can enter a new phase, launching a contract with predictive maintenance and performance monitoring. And that will be linked to similar pumps on Valhall and Ivarossen.
And then soon, we will evaluate if we should scale that to the 3 other assets and also across towards other equipment categories and other contractors. And finally, on the initiatives. To me, lean is 2 things. You need to get the core competence in place, but then also work it out in the sharp end. And that's where I am just now.
We have to develop the practical versions of lean out in the sharp end in the primary processes and in our everyday work. Then on top of all this, what we see is that we are a company which is delivering operational excellence every day, But still, there are methods and thinking, which is really linked to the proud legacy of the companies that formed Aker BP. So in 2020, we launched an initiative called the Aker BP operating model. And what we are looking for there is to find out where on all these different topics, where are we the best versions of ourselves in Aker BP and how we use the improvement toolbox to improve that further and then roll it out across a standardized organization. Really doing similar tasks in a similar way in the entire organization.
And to me, I think this is a no brainer to become even more cost efficient. And costs. In 2019, we were at 12 point $4 per barrel. And in by 2020, we will be down at $10 per barrel. And this curve was in last year's capital markets update.
Now we have extended the time line with the years, and we also updated the timing of Nuwaka. But still with this clear improvement agendas for each and every assets and the new operating model coming, we have really launched a very sort of strong and coordinated improvement drive in the entire organization. So that means that I believe that we're able to push this downward further and deliver at $7 per barrel or below by 20.20 3. And that's actually 40% decrease from the 2019 numbers. And we have a huge portfolio of discoveries, Karl, covered that in a nice way.
And to me, it's important to see that the majority of these discoveries are close to our existing assets. So they're building on both the competence and the opportunities we have in those areas. And we are now trying to develop them in an open way. As I said, we have this threshold where we are looking at positive NOV at $35 with 10% discount rate. And another important thing with these discoveries is that 75%, if you look at the middle chart, is already meeting those requirements.
And to me, that is not the finishing line. We are working intensely to improve that and make the sort of average even better. But obviously, the focus needs also to be at the higher end. And we're working to mature subsurface and draining strategies and drive the cost down in those projects to make them robust enough to sanction. And then if we manage to deliver on this and get organic growth producing this resource base, we're looking at adding more than 200,000 barrels to our production.
And the good thing with that production and that activity set is that it's spread across all our assets. And that's really motivating for an organization to see that we have things moving over the whole board. And now by this, I want to take you in and take a closer look in how this translates to more specific initiatives and projects with some examples for each of our producing assets. And then we will start with Skalf, which is actually entering a new phase by adding new production through a project, which will be shown in this short video. So that was a bit of engineering fun for you all.
This is a project that has been done a lot of good work already to improve it, And we have a fantastic opportunity to deliver on excellent numbers. I have to highlight the way we work from the reservoir side, which is internally in Aker BP with the drilling alliance and then also together again from Aker BP side with the different alliances on the facility side to seek opportunities in the existing facilities. We have been able to debottleneck and start doing that on the Skarva top side and that actually makes it possible to accelerate the Phase 2 of this project. And then we have created a paradox. We're starting up the first well on Arfjord, but it's from Phase 2 and it's in the first half of twenty twenty.
And then we will have 3 wells from Phase 1 by the end of 2020 and the rest of the wells in 2021. But this is a project underway and we shouldn't celebrate before everything is finished and we have a lot to do here on the middle of a drilling campaign and we're also entering into season with pipeline installations and completion of the Subsea facility. I just want to mention as a technology example that this project, we've matured a heat electrically heated pipeline project together with the alliance, which means that we are removing the need for more traditional chemical injection. And the reason why this is important now is that we are talking distances of 30 kilometers and beyond, and this triggers new possibilities for tieback of opportunities further away from the surface facilities. So 2019 for Afrold is going to be extremely critical.
We are really pushing to deliver on a breakeven below $15 And I think Karl mentioned it, it's about Skaarf taking the lead and making sure that we are collaborating with the alliances so that we are delivering a true one team effort. And as mentioned, Arfuhl in Skal is marking a new phase. And Skal since the start up 7 years ago have been producing from its sort of original shape and form. Now we are adding new production from 1 of the tiebacks and it's really a start of a wave of new tiebacks. On Skav, the last 3 to 4 years is a fantastic story.
And if you look at the curves from left to right, you see that the reserves have basically doubled. And we have steadily increased the production efficiency from €85,000,000 to €96,400,000,000 in 4 years. And the production cost is nicely trending downwards. And then the 4th factor with SKYY is that we're working intensely on our emissions and energy optimization. And in 2019, this has really paid off on Skalf.
And as Karl said, a bit more details on that. If you count Johan Sverdrup, we will soon have 3 out of 6 assets powered from shore. So the focus I need to have with my people is to look at operational setup we have running as of today with traditional power generation. How can we dig into that with new technologies and digital insight to make sure that we are reducing CO2 emissions and by that, saving tax and selling products. For me, this is about 3 sort of fundamental things.
As I said, it's about being conscious in everyday operation and when we execute our procedures, it's so easy to find good examples where we are improving if we just sit down and challenge ourselves. There's a lot to gain from optimizing today's normal routines. And then the second element is all about looking at new technology and how that can shape positive business cases into the top side, resulting in medium type of modification projects. And then the third is all about digital insight. We I think we started on the production optimization route, but all the things we learned there seems to be applicable to actually optimize on the energy consumption and then emission side as well.
And then a few examples. SKYYVE deliver gas from the FPSO through the Oskai transport pipeline to Karstel. We do that according to some specification linked to both composition and pressure. Now we have scrutinized that, taken out conservatism and optimized the way we are supplying energy to deliver to those specifications. Quite an easy exercise.
Last year, we are saving 22,000 tonnes of CO2 and saving NOK 36,000,000 every year. That's a fairly big example, at least to me. And then we have a lot of smaller and one of the examples is linked to how we can, through collaboration in an area like Kaltenbanken, really optimize both the sailing routes and general logistics, but also loading and fuel consumption. And the effect of that and that collaboration is saving 3,300 tonnes NOK 2,400,000 a year. And what we and I want to do is invite to even more collaboration.
On the topic of collaboration, you need to be clear on where do you need and want to compete and where should you really join forces to find a better common solution. And for Skar, the aim is to actually have reduced the CO2 emissions at least 30% from 2018 levels by 2025. And in 2020, we are working a series of initiatives and really projects to be sanctioned and start delivering on further reduction on CO2 emissions. And then from sort of the overall picture for Skalf, just to pick out a couple of other topics. And Karl touched upon the way we are looking at digitalization and robotics.
And to us internally, Skaive has been chosen as the front runner on automated inspection. And in 2020, that means that we are steering a lot of our digitalization and technology focus towards testing both robotic and drone inspection platforms. And the goal is to really sort of harvest data and feed that into the digital twin of the Skaglfield. And in that, enable future remote It's going to make it cheaper, but also it triggers the opportunity to collect a lot more data and enter that into the digital twin. And then the second topic, we mentioned Alfrud.
It's seen to the left how that sort of grow is growing the production. And we are really now into the post airfield phase. We are looking at developing the resources in the area. And if we are able to do that, the non sanction adds up to 150,000,000 barrels with projects like Idunur, Alvenur, Sreck and Erne, which Evi will return to later. And many of these will pass the DG 0 and enter into project maturation during 2020.
And when maximizing value for these projects on Skarve, we really start with the basics, the reservoir maturation coupled with the Drainage Solutions, what's the optimum immersion. And then to me, it's also about checking if earlier involvement of the alliance partners into sort of the home turf of Aker BP can create more value. And we have a portfolio of new technologies, but also initiatives on standardization that needs to be combined to create the better projects. And then for Skalve, it's also the second topic and that is that we have a chain of opportunities and we need to use the existing infrastructure in an effective way. And that means 2 things, both look at the infrastructure and see if the capacity needs to be increased and the bottleneck.
And then secondly, make sure that we have a sensible optimum sequence of phasing these cabinets into SKYYVE. And Skarve and Alvheim, they are quite similar. They are FPSOs boats. They have concepts, which is linked to large subsea developments. They're actually between themselves sharing our 58 subsea Christmas trees due to be 59 this summer.
But more importantly, they share this area development opportunity, both being forward leaning on just that area development and then maximizing the use of the existing capacities of the infrastructure with a view on also the lifetime lifespan issues. So from that, SKYY has a lot to learn from Alvheim because many of you know that, that has been a success story for the Alvheim asset. And this success is described fairly well in the curve to the right of view. We see that the T2P reserves has grown 3x since the PDO in 2004. And to do this, the core of it on Alvheim is really safe, reliable operations and production, making sure that, that doesn't take away the focus from what we try to achieve.
It's a high production efficiency. That was actually above 98% in 2019 and it was around 97% if we add a subsea buoyancy issue, which gave us some challenges this summer, but was solved in an excellent way. And having that basic operational excellence, they have been running and been forward leaning in searching for the opportunities in the area, both the exploration part of it and the BD side. And then been able to push up production through new IOR technology, the infill well program and the efficient tiebacks they have been running. And this is also the area where we have most experience.
We just saw the successful Subsea Alliance. And if you look at the possibilities going forward together with our Alliance, it's important to us to seek synergies in the total portfolio with
them.
Thank you. If you look at the priorities and the way forward for Alvheim, it's a lot to do about just continue the direction and the way we are doing this. It's solid, but we also know that it can be improved. And having all these experienced people in that organization, it's important for me that they are joining into maturing this Aker BP operating model, but also be open for adopting some new ways of doing things and thinking in the Alvheim setup itself. And Alvheim, they need to continue to deliver on infill wells at a steady pace and mature and improve the tiebacks and optimize the production capacity of the FPSO and the subsea facility.
And on that issue in 2020, we have sanctioned projects to lift capacities in different areas, particularly on the gas export side, and that should trigger new opportunities for the tiebacks. And the way Alvheim has worked on optimizing the production capacity means something to me because they both work to increase the capacity, but they're also working on maximizing the use every day of the capacity that exists. And because of the push and because of the success in Insight, Alvheim is a natural frontrunner on that topic, production optimization within operations and asset development. And they're both looking at new technology, but also using the new digital insight to work a program of initiatives. One example, not to be too technical, is that we have made for a certain type of topside equipment, we're making all data available, including design limits for equipment and live sensor data.
And then we are running algorithms on top of that, so that we make sure that we are not bounded by static limits, but we make use of the dynamic capacity of the system. One example, and it actually means adding barrels to the day. And in 2020, that means 80,000 new barrels from over. And then we have another example, which is an umbrella initiative and Karl mentioned the Best Day. It's a good tool to see how good we can do things.
And part of the Best Day is a concept, we should call digital oilfield. It's really a digital advisor and a digital twin from reservoir to cargo tank. And the idea is that this shall constantly optimize the whole value chain and production in it for us according to the boundary conditions given by the reservoir and the facilities. And going forward, we will continue increasing the functionality and also look at how we can integrate that type of automated processes into the core control system so that we are really making the most out of the new type of opportunities. And then the Valhall area.
For me, it's special in Neneways, but 2019 was special because the activity level is very high in all areas really. And then in all of that, it's really motivating to see that Valhall and Alliances are able to deliver such a successful project as the Valhall flight quest. They delivered it safely on time and on budget, and it's producing as planned. So this project, the business case, fits perfectly with the strategy of WALAL going forward. And just mentioning one thing, this is not Johan Sverdrup and doesn't have that type of complexity, but it's a full blown project.
And to us, it's so important to do these lighter, unmanned projects right. And it's not easy to be a perfect operator of unmanned facilities. So having this project now executed in a perfect way means a lot to us and the ability to sort of grow our operator competence around unmanned facilities, which might be important in a Nuvaqa setting, for instance. And it's an excellent effort and a collaborative effort with the involved alliances and we are really sort of dug into what common drivers really mean for executing a project within alliances. Just mentioning an example, if you go into a meeting room in the wellhead facility alliance, I'm sure that a lot of us will have problems distinguishing between company and contractor and the different contractors in the room.
And that means a lot because they are really occupied on the task and how to solve that in best possible way together. So the discussion is extremely open. They're discussing the challenging. They're putting them out on the board and finding solutions to it together. They're talking improvements and way forward.
They're not stuck in arguments. And as I said, it's a extremely successful project, and it's natural then for us to challenge both ourselves and the alliance. And we are now right in the middle of seeing if we can copy this, a perfect copy to the HOD redevelopment project and execute it and in a continuity from the Vala offline quest. And it looks promising, and we are planning for an FID fairly soon. And in this project, and Karl mentioned it, we're also dependent on and using with success the new methodology around single trip multi frac for stimulating the completed wells.
And I wasn't here all of 2019, but I know we talked a lot about this methodology. And in the meantime, we have formed the Well Intervention and Stimulation Alliance. And through that, we have actually now used this methodology and successfully run it on 1 of the Valhall field center wells and 2 of the Valhall flank West wells. And we are seeing that is actually performing better than we expected. We were hoping for completing 2 zones per day, but we're actually now at the level where we have seen that we stimulate 3 zones in 24 hours.
And we have this alliance. It's working now to improve both the technology itself for the well and for the equipment, but also looking into the operational setup around it to make sure that we are increasing the availability of the spread that is required to execute this operation. And it's a huge upside. We have wells waiting for stimulation and start production of Wawal, and we are looking at accelerating the entire well program in 2020 2021. We're also using this to see if we should think differently about how we design and complete our wells.
So the methodology might dictate how the concept of wells might look like. And again, it fits with the Valhall ambition of producing 1,000,000,000 barrels more from the area. And it might also be important for tight reservoirs elsewhere in our portfolio. And then 2 topics on Valhall and in more general. As I said, it's an extremely high activity level, and that will continue.
And I think it's important then to recognize that complexity. We are running a lot of greenfield projects, brownfield projects. We are operating and producing and we are drilling new wells and stimulating them. And to do that, we need sort of execution discipline, but we also launched another tool, which Valal is an obvious frontrunner and that is looking at us as a company, which planning processes are we running and then we are going to integrate them all to make sure that we have the total control over the entire value chain. And it's really about connecting the silos, which exists in every company and all multiprocess setups.
And for me, this will solve some main challenges and some opportunities. We will have smoother operations, stable plans, and we're also going to make the data and the plans available for a lot more collaboration seamlessly and analysis on top of it. And then the other main topic of Alal is that it will go through changes in the years to come. We launched a transformation program and that consists of really sort of 3 main elements. The first one is that we have a lot of technology initiatives, subsurface, well, topside.
It's about single trip, multi frac. It's about optimized drilling on topside on Waha. So that is an initiative. The next one is that we are maturing different scenarios for how we want to develop the infrastructure on the Valal field center and the flags. And then thirdly, Valal will be an obvious and integrated part of the new operating model.
So when we merge these 3, we will then find out what the optimum way forward will be for Valhall, which has the ambition of 1 more 1,000,000,000 barrels to produce. And then Ula is a late life producer. It's sort of resource intensive, both on the energy side and the people side. So we have some natural objectives. We want to reduce the cost by operating cost by 25% and we're going to strip out the waste in all our processes and that has then resulted in Ula being the front runner on our lean practical lean initiatives.
And we are prioritizing work, which is supporting the delivery of safer setups and operation and production potential. And this then will further and we will work on further increasing the production efficiency, which is about replacing obsolete equipment and also higher quality maintenance and planning as I covered earlier on. Grow the margins, and this will then be the necessary basis for even evaluating if we're in the middle of the 20s are looking at a field and URA field redevelopment with new infrastructure. And in parallel, we are maturing a portfolio of projects, including King Lear and also looking at Tambar again and other infill candidates. And we will take a decision in the middle of 2021 whether to go the redevelopment route
or not.
So no doubt that 2021 2021 is going to be crucial for the further development of the Ural field. Ivarossen is a different there we have the Ivarossen. It's a different ballgame altogether. And quickly now, we have implemented onshore control room. It's been operating for 1 year.
We've had no unplanned downtime due to this. And if you look at operational availability, it's actually at 97%, if you don't count for what is imposed on us from the Edvard Grieg side. And doing this is obviously a change for the organization, but they got used to it extremely fast and now they're really looking for the opportunities this trigger. A control room in the middle of the center of Trondheim means that operating Ivar Osen is a lot more available for people that can work differently around production optimization and planning. And we can also start then involving contractors in a more integrated way in Trondheim.
So we are also looking at extending this and what does it take to view Ivarossen as partially unmanned for periods. What are the necessary modifications? What new technologies will play a role? And which new processes around operation and maintenance do we need to mature? Even Austin is a modern setup and then it becomes the obvious front runner on digital operations and we're piloting a lot of use cases.
I mentioned that we are trying to look at the unmanned operations and what that has taken, that is really painting an end scenario and then see what kind of initiatives we have to initiate around digitalization of technology. We have one more initiative like that and that is to see what does it take for us to be fully paperless in our operations around Ivarossen by the end of 2021. And another important topic is that by 2022, Ivarossen will have its power via Edvard Grieg from shore, and that has obvious positive effects around emissions. But the other important side of it is that we think that will increase the production efficiency because that power source is deemed more stable than the turbines on Edvard Grieg, and we possibly can increase the production efficiency towards Eeva Rosen's number of 97. And then back to Sverdrup and round it off.
It's a huge world class project. In early phases, we established a a recovery rate ambition of 70% even before we started building anything. So that is unique. And the project cost story is shared out in the media. We have reduced 40% since the PDO estimate and that is all to do about timing, maturation, clear improvement targets and open collaboration creating WinWinston.
We also see now the quality of the deliveries here and it's proven through the start up. It actually started up just a few hours after the target, the stretch target that was set in 2014, a few hours. And the production efficiency has been stable and very high since the start up in October. The other important thing to me is that the right contractors to partner it, and that is not only to be part of a nice journey, but it's also been part of that learning curve that we've been through. And that also counts for the owners that had a really tight collaboration and joined forces throughout the project.
And now Aker BP and in my position, I want to continue to engage and assist in executing the rest of the activities. The main topics for us on Johan Sverdrup is to keep the PE production efficiency high. It's to look at increasing the capacity of the existing facilities, for instance, through the methods that I've mentioned here today. And it's to deliver on the drilling program and ramp up, which we are have started now for 2020. And it's also to start digging into the operational costs and see if we can pull them downwards.
And from the Aker BP side, we want to be a constructive contributor to the Phase 2 project as well, which is all about increasing the production capacity to 660,000 barrels. We are adding the 5th platform out on the field center. And it's about increasing the power from shore to cater for that field center extension, but also the broader area, Rifteeva Rosen power from shore case. And then thirdly, it's about developing the flanks of the field with subsea installations for production and injection. And this is a huge project.
I think Karl mentioned it. It's in good hands with Equinor. And we from Aker BP side, we want to be involved and assist in making this as good as possible. And I believe that we can improve with what's ahead of further like we are doing with our own assets. And there, it's all about maximizing the value of what we have at hand and do that in a safe and responsible manner when we are delivering on all our operational priorities.
And of course, as an organization and me, we are ready to handle more, so we want more assets. And by that, over to you, Karl and Nwaka.
Thank you,
Soder.
Lots of detail, but I think you've got to gist. We're really working hard to make sure that we maximize these assets, introduce value, but also maximize learning throughout the entire asset portfolio. Moving on to Naka. Since we last spoke, there has been positive development in as much as we've collaborated 2 concepts that we looked at previously. They retain the capability of developing the entire area, which as you probably know has resource base of around €500,000,000 with an additional upside of the €200,000,000 leaving the total area at around €700,000,000 and then some additional exploration upside on top of that again.
It incorporates the UPP and it incorporates a production platform in the south, significant amounts of wells, almost 40, 46, I think it is, standing at the moment. Numbers to be changed, of course. But as it stands, 5 platforms, 4 subject templates, It really is a very, very interesting project. Not everything is done. We're still discussing commercial terms, but at least in my mind, we're on a positive track.
And I really want to commend Equinor in this respect. I think their contribution into the project has made it more robust. We have identified upsides that we didn't know exist. And their project organization has contributed in an extremely positive way when we have created this possible technical concept. Of course, these concepts need to be future proof.
Now future proof is a fantastic word. You can put anything into it. Last year, I showed you a slide. On that slide, there was a certain dog. Anybody remember that?
No. And I told you that this was a potential new employee with Aker BP. And then for 1 year moving forward, this potential employee has actually become an employee. So let's roll the film first. So today, we launched the collaboration between Boston Dynamics and this is a Boston Dynamics Spot Quad Pad.
It is in reality a platform for instrumentation, in this case, an IR sensor, HD cameras, sound, but you can basically put any kind of sensor equipment on it that you like. It's high classification in terms of existing external environment, but it's not EX yet. We're working on it. It can read tax numbers combined with the contextualization that exists in the CDF. We can run automatic gas detection.
We can identify vibrations without having to install sensors directly on the equipment. We can read tags and thereby identifying whether these tags have anomalies. And we can basically do pretty much all the inspections that a human can do at this point in time without the humans being involved. It can actually work together with the humans as well, carrying out inspection tasks ahead of, for example, a maintenance task and thereby reducing exposure, improving efficiency and maximizing time and resources spent on the platform. At the moment, Spot is in training, but we have had a little bit of leave from training to come visit us today.
So around the corner, here comes our U. S. Employees. Ladies and gentlemen, please welcome Spot. So this is the 1st robot that has an Aker BP employee number, and I'm pretty sure it won't be the last.
Hello, Spot. How is training? Are you doing good? Not that sure. Okay.
Have you detected any anomalies? No? Are there anybody here that shouldn't be here? Oh, there is. Okay.
Those who shouldn't be here can report to Kjetilbacher later on. And then I think I say thank you spot. There will be ability to take photos in the break. And if you do, we would be happy if you use the hashtag SpotakaBP on social media. I'm sure you're already posting.
And with that, let's break, yes, for about 20 minutes. Isn't that right, David? So we'll see you back here in 20 minutes. Thank you.
Welcome back from the break. I hope you all got some coffee and got to take some pictures with Spot. I'm pleased to introduce myself today. I'm Eevi Glorstra. I'm SVP of Exploration.
And you might wonder why did we start with an evil awesome movie. Well, several reasons. We wanted to get you back into your seats. 2, I don't have a movie for exploration. Now maybe that's a challenge for next year.
Get some more subsurface, slightly less steel, but this is also a good movie because it has a little bit of a personal touch to me. I was hired on with the Noshke in 2011, just a couple of years after the discovery of Osm. Back then, the company was quite small, and we all got to contribute a little bit, at least we felt we contributed a little bit to the further understanding of Osmond, seeing it develop. And as the company grew and at an increasingly distance, just seeing how we got the project on production, on time and to plan cost, That has been a true inspiration. But it all starts with exploration.
We have to find the hydrocarbons first. And that's what I'm going to tell you a little bit about today, how we're working in Aker BP and how we have created value the last few years. Looking at the slide today, is this a recap of the exploration formula? We spent a lot of time maximizing the value of our producing fields, but we also want to create and find new hub opportunities. We spend about 60% of our drilling budget towards our exploration drilling budget towards drilling wells around our existing fields.
That way, we can fast track potential developments into our fields and also increase the shareholder value and return of investments. But we also want to create new hub opportunities. So we keep looking for those in various parts of the MCS. We covered across the whole MCS from the Barents Sea in the North all the way down to the Central Graben. With new hub opportunities, we think in 2 different ways.
We can go for large stand alone opportunities prospects, but we don't have that many left on NCS. So it's increasingly important for us to look at cluster developments, not unlike what Kalle was describing with Nuaka area. So that's becoming more and more common now to look for the small opportunities across license boundaries, work with our partners and see if we can't get this tied back or create a new field development. MCS is getting more mature and there's an immense amount of data available. We think the key to success to find new growth opportunities in the way we can smartly integrate all data types, new and old data with new technology.
And that's why this is one of the key projects for us. And we think that's also the key to the success that we have had and that we aim to have moving forward. And we haven't changed the strategy the last few years. And you think, well, do we need to do that? I don't think so.
We have delivered and it's not a static picture. When we have a company with a huge success with mergers and acquisitions, our core areas can and may change moving on And we increase the areas that we're looking at, which is very exciting. We've had an amazing 2019. The results speak for themselves. We participated in 8 out of 17 discoveries on NCS last year.
We had the biggest discovery as well in Liatorna. That is truly amazing. Finding 100 and 70,000,000 barrels, which is 3 times what we produced last year. This will bring significant value to our company. We did that by keeping also the finding costs low.
It's a fantastic result to have $0.6 per barrel after tax. Keeping the finding cost that low is the best way exploration can help creating value for the company and also finding barrels for our hopper. We participated in 16 wells last year, which is one of the highest numbers that we've had over the history of the company. Normally, we drill around 10 to 12 wells, but last year we planned for 15, added 1 well during last year because of very high drilling efficiency and it was an opportunity for us to drill an additional well. We work closely with Drilling and Wells to drill these wells efficiently because that keeps our costs down.
And when we're keeping the costs down, we can also drill more wells within the same budget and test more opportunities for further growth. Looking at the graph to the right left, sorry. You can see that we set an ambitious target in 2016, a volume target of finding 250,000,000 barrels and we achieved that last year. But that doesn't mean that we don't have a sense of urgency to continue creating growth and finding new opportunities for exploration. We've done well this year.
We're really aiming to do well moving on. And for us, it's worth revisiting Ollivane. Now we heard quite a few things about Ollivane already. I talked a bit about Ollivane last year. It has been a tremendous successful area for us.
Exploration successes tie back to the FPSO and we continue finding new prospects, new discoveries. But it's a result of a long term strategy. We acquired Marathon in 2014. We acquired large regional data sets. We reprocessed the data, interpreted the data and started harvesting from that success in 2018.
Then we discovered Frosk. We managed to put Frosk well on production on the test production in 2019. That's fast tracking. It was a discovery in injectides, which is a relatively challenging depositional system. And the Frosk test producer will give us valuable information about the connectivity in the system.
And it will certainly impact the Froskelor development plans as well. The Froskel test producer is doing really well. It's producing 12,500 barrels a day with no significant water cut so far. And we're also testing and getting information about the pressure in the system that will again tell us more about the connectivity in the reservoir. Now why are we waiting with Floskeloi?
Well, Floskeloi is straddling the U. K. Border. So we're really pending an appraisal on the U. K.
Side next year. Not next year, this year, because it's 2020. And we've heard some rumors that we might get a well or 2 in the same system in 2020 later this year. We're anxiously awaiting those results because then we can truly see how big this discovery is and we can make a plan for how to take this forward and also where it's going to be tied in. So it's very exciting for us.
But at the same time, so we announced Froskuloyd discovery in 2019 early in February. We work closely with the asset team and they're now following both of these discoveries and we work with them to further understand the deposition system at the same time as we want to mature new exploration opportunities. So we keep looking for more and we have a hopper of relatively small prospects, but they're high value barrels because we can take them straight back to Alvheim. So by working very closely with the asset teams, we can find timely drilling for the exploration opportunities to create most value for the barrels. But we're also hoping and evaluating to find bigger prospects.
And this year, by the end of the year, we're going to start interpreting ocean bottom node seismic data. This is also something I talked about last year, because we acquired this over EBITDAR AUSEN a year ago and we're just getting the data in house right now. And this is the first time that we get ocean bottom node seismic on NCS for exploration purposes. So we're pushing technology. It's been successfully using Gulf of Mexico for several years.
It's quite expensive. So we're now testing it over larger areas, Austin, now Frosk and Froskeloy to see if it will actually enhance our understanding of the reservoir. Very, very exciting. So we start interpreting that by the end of the year, and hopefully, that will give us new opportunities in our portfolio. Now looking at how we've been attacking, if you want, the regional area around Oliveheim.
We should use this as an example moving forward to our other assets as well. And in 2016, we merged with BP and we added more assets to our core areas. And the other example I want to talk about is SKARI. It has several similarities, as Jatin said, its FPSOs. They have SKYY has high capacities, long term infrastructure in place.
And we would like to do the same in this area. It's a very prospective area. It's very competitive, but we already had success here. In 2016, we started the same method, started interpreting the data, started to try to understand the whole systems and see what wells and what opportunities is it worth for us to participate in that could curate value and potentially be tied back to SKYYVE. So last year, we drilled 2 wells as a partner in Erne and Schreck.
Both discoveries adding 80,000,000 barrels to our portfolio, both planned as tie back to the SKYYF FPSO. So that's the first step towards showing the same way of working as we did around all of them. The other thing worth mentioning is since this is such a competitive area and it's slightly harder at times to get operatorship, portfolio management and business deals are becoming increasingly important. So we were so happy to announce this morning the deal with PGNIC, where we're taking over as operatorship for Shrek in the development phase, allowing our own project organization to execute a fast and efficient tieback to the Skylab FPSO. Additionally, PGNIG entered Ulvin Northeast and Ulvin North.
Ulvin Northeast is the well that we're going to drill in 2020 by the end of the year. It has a relatively small resource potential, but the most important thing with Olvera Northeast is actually that we get to test the reservoir, the same reservoir we have at Alvheim North. So we'll have a significant impact on the Alvheim North field development plans. And if it's a discovery, it has a relatively high chance of success, then we'll test it. And we do that to fast track Alvheim North and to really understand the complexity of the reservoir.
So very exciting well. But it's exciting days, because we're currently drilling Nidhogg. It's a gas prospect also in the tie back distance to Skydive. We're waiting on weather. We can't do anything about that.
Otherwise, we would be closer to the reservoir than we are. But within a couple of weeks, we're hoping to hit reservoir and see if that can give us the perfect start of 2020 drilling. So Sky is certainly an area to watch, an area we keep focusing on, an area that we want to succeed. Another discovery worth mentioning is Liatorno. It was the biggest discovery on NCS last year.
It has large volumes in place, 500,000,000 to 700,000,000 barrels. We press released an estimated 80 to 200 recoverables. It's a somewhat uncertain estimate because we failed at getting fluid samples. The reservoir is at such a shallow level at 1,000 meters and the sand is unconsolidated, it's loose. So it was hard to actually get fluid when we tried to sample it.
That's why we in 2020 are drilling an appraisal well to check for that and our focus is on technology. Our focus is on getting data that we need to figure out if Lea Torna is producible. But very, very exciting follow-up for us. The other thing that's exciting about Lia Torna, yes, it is a bit of a challenging discovery, but this is NCS. We see a lot more of these wells moving forward.
We need to test new play types, new concepts and I want an exploration department who's hungry for testing new things. So I think we'll see that and we're a company willing to take the risks of testing something new. So all honor to us for drilling Lia Torna and finding oil. We have a very high risk and high potential campaign in the Barents Sea. It's the final drill out of a longer term drilling campaign in the Barents.
It's taken some time of various reasons. It's high complexity wells. It has some higher risks associated with them and a few of the wells are long term commitment wells. Among others, the Stangnesen in Barentsies Southeast from the 23rd round. So it's been in our portfolio for a while and we're now planning to stick with the commitment that we have and drill the well.
When you're looking at the other wells here, the Shenzhou has the same play type and has a higher potential, volume potential and is interesting. Some of the potential tieback, you can see its large uncertainty in the volume ranges, which points to the complexity. And then we have BASC, which could help lifting Alta Guta development plans. It's now been publicly known that Lundin doesn't see Alta Guta as a standalone potential anymore. So it's definitely more important us now to figure out what the real potential in the area is.
We're still not in operating a discovery in this area, And we have a few exploration licenses and now we're finalizing the drill out campaign. This will certainly impact the future Barents Sea pending the results here. But regardless of the results in the Barents Sea, we have an extremely strong exploration portfolio from the Norwegian Sea and further south. So looking recapping all the wells that we're going to drill in 2020, fewer wells than last year, it's 10 wells, more on average for us. It's a net and risk volume of 320,000,000 barrels, risk volumes of 90.
I've talked to most of the wells on this list already. Worth mentioning is Servesen. It's a well that's been drilled close to Iverossen. Marik's another well-being drilled close to Ossen and Edvard Grieg Lundin operated. And then we have Gorantiana West, been drilled in the northern part of the North Sea, important to the Garantiana field development case.
And we're hoping this will strengthen a resource base to realize the value from Garantiana. So that's the whole portfolio for us and I just want to end this section with this slide. In 2020, we're going to continue positioning Aker BP for further profitable growth. We're going to follow-up the successes from 2019. We're going to drill the appraisal well in Liatorno.
We're going to follow-up Frosk and Froskulor learning together with Alvheim assets the complexities of the Inductite play. We're going to fast track Shrek back to Skarv and mature it as best as we can on the subsurface side for the project team to take over. Since we're drilling fewer operation or operated wells this year, we're going to focus on the improved part this year. We're going to focus on technology. We're going to focus on data flow and data integration to create a new opportunity set and a new portfolio for us for 2021 2022.
We're going to continue growing by utilizing existing infrastructure on NCS. We're going to look at all the opportunities out there that can create value for Aker BP. We're going to increase the focus we have on licensing rounds and also business development. We have 60 exploration licenses in ARKBP. It's a good number and we're going to continue highlighting, I was about to say high grading this portfolio looking into, as I said, both licensing rounds and business development.
And we're going to continue making decisions based on data and analysis. We're proud of having done that and that's important for us and a key for our success moving forward. With that, I'm going to conclude my section And I'm happy to introduce David Tonner, CFO of Arke BP. David, the floor is yours.
Thank you. Thank you, No video for me, just some water. Thank you. Openness, transparency and data sharing, all important elements of Aker BP's improvement agenda and important as part of our digitalization journey. Last year in our Capital Markets Day, we took this principle also to you in the financial markets.
We shared with you our ambition, our capital allocation principles and the associated business plan. This included our production profiles, our investment levels, costs and associated cash flows. We also shared with you a predictable plan for returning value creation through dividends. And we showed you what the balance sheet would look like in various oil price scenarios. The foundation, of course, for our capital allocation strategy is the great portfolio of current producing assets, including the world class Johan Sverdrup field.
Furthermore, as Karl and Sertel has already talked about today, we have a large resource base of 2C resources that, if matured, will deliver profitable growth over the next 7 to 10 years. To maximize the returns on these investments, we believe it makes sense to finance them through a split of equity and debt. First, 90% of the CapEx is recovered through depreciation over 6 years. And secondly, Aker BP has over the years developed a very strong relationship with our banking group, and I'm happy to see many of you here today, but also the debt investors. This provides us with access to a variety of debt markets and has enabled the company to develop a robust balance sheet with high capacity and relatively low cost of debt.
Simultaneously, as we invest in growth, costs are also trending downwards. The value creation from our portfolio is high. And in Aker BP, we strongly believe in returning parts of that value creation to our shareholders through predictable dividends. We believe transparency on distribution policy is good for investors and that it adds capital discipline. Of course, the oil and gas industry is cyclical, and oil prices will be volatile.
The investment cycle for offshore oil and gas is typically longer than 3 years. However, we believe the underlying value creation in Aker BP is not driven by fluctuating commodity prices that we cannot impact and most often not predict. Consequently, we do not believe it makes sense for us to optimize our value creation plan based on cash in any given year. Our financial strategy has the objective of maximizing returns through the cycle. But of course, to do this, we need to closely monitor and understand the external environment and then balance our 3 financial priorities in a holistic manner: invest in profitable growth maintain sufficient financial capacity and return value creation.
Following this strategy in 2019, we became investment grade. And moving into 2020, the company is now even more robust than ever, and we are confident that we will be able to deliver on our value creation plan. Throughout the rest of my session, I will quickly walk you through a bit more details on how we delivered on our financial priorities in 2019, but more importantly, what the outlook is for 2020. I will also provide you with an update on the longer term plan. We have updated all our profiles, and we have also extended most of them, providing you with even more transparency.
But first, some words on 2019. I'm happy to say that the investment program delivered according to our expectations and as guided to you 1 year ago. The main part of CapEx was related to Johan Sverdrup and Valhall. The exploration program delivered great results, as Eeva has already covered, and we managed to maintain the spending within the original budget. We also optimized abandonment expenditure, moving spending over to more profitable production drilling.
We spent quite some time also further optimizing the balance sheet and the capital structure throughout the year, adding capacity, extending tenors and reducing cost of debt. We started off by replacing the secured RBL with an unsecured RCF of $4,000,000,000 lowering margins and extending the maturity. We obtained investment grade credit rating by both S and P and Fitch. And following this, we had several successful bond offerings throughout the year, increasing their financial capacity, and we saw the effect of the investment grade credit rating as the interest costs were, of course, significantly lower than what we have achieved on our previous bonds. Lastly, we returned value creation to shareholders as planned with $2.08 per share or $750,000,000 in total.
If we now move over to the longer term profiles. As mentioned, the starting point for our capital allocation strategy is the return from our existing portfolio. And if you compare this to what we presented 1 year ago, sanctioned production has increased some in the period between 2021 2023, driven by the sanctioning of new infill wells close to existing assets such as Valhall. And we have moved into the New Year, and then most of the CapEx for 2020 has been sanctioned, and we've also sanctioned some additional CapEx for 2021. The sanctioned portfolio provides a significant cash flow generation as relative small investments are needed to keep the production flat over the next 4 to 5 years.
And this, of course, is a great starting point. But over time, if you do not invest, natural decline will impact production and the relative share of cash taxes will increase since the undepreciated tax balances have been drained. Free cash flow will therefore also trend down post 2025. However, as you know very well, the sanctioned only scenario is not a plausible scenario for Aker BP. This is, of course, given our large resource base of 2C Resources.
I think all the other talkers or presenters today have already touched upon it, but I just want to add a couple of comments. In 2019, we kept the hopper quite stable. We moved Hud from 2C resources to 2P reserves, and then we added resources from the SREC and earned discoveries as well as infill opportunities in the Valhall, Skarve and Rula areas. We ended the year with 931,000,000 barrels, where roughly 75% is liquids. In addition, we still have further upside potential to these numbers as there is no 2C resources related to Liatorna in these numbers, and we have no 2C resources related to Johan Sverdrup.
One leading indicator regarding the impact of our improvement agenda is the ability to improve the economics of our non sanctioned portfolio. The graph on the right shows the full life cycle breakeven price of the portfolio of 2C Resources using a 10% discount rate. The difference between the pink and the gray line is the development from end 2018 to end 2019. In particular, we're happy to see the positive development for the project in the lower end of the curve. This is 20 to 30 named projects in our business plan, all close to our existing assets.
Even at an oil price of $50 Brent, these projects typically have an internal rate of return between 20% 50% and are definitively projects that we would like to invest in. Now Carlo has already talked about the size of the price. Already in 2020, we expect to increase production with over 35%. And over the planned period, including Nuaka, the average growth rate will be 15% per year up to 2026. And even if you were to exclude Nuaka and just look at the portfolio of smaller, more flexible, non sanctioned projects, the average growth rate will be 15% from 2019 to 2023 and 10% from 2019 to 2026.
And remember, as already been stated, this does not include any upside from all the work that Evvi and the team is doing in exploration. If you compare this graph to last year, the key change is that we have moved the Nuaka project out in time. Last year, we showed production in 2023, while the base case outlined here has production start in late 2025. Karl touched upon it, but this will derisk the project, allowing for the joint project team more time to optimize the new development concepts to allow that we maximize all resources in the area at lowest possible cost. It also provides Aker BP with a bit more steady growth profile and less intense capital expenditure program the next 3 to 4 years.
Talking about capital program. The associated investment program needed to capture the organic growth shown on the previous slide is illustrated with the same three wedges: non sanctioned, non sanctioned and Nuaka. And comparing this to last year, the impact of the new timing of Nuaka becomes very evident. The CapEx in the 4 years between 2020 2024 is reduced with almost $2,000,000,000 with roughly 75% of these costs shifted out to a point in time where our base production is relatively higher. As already shown, the sustaining CapEx to maintain the production at current level is low, and the additional CapEx spent on top of that has the objective of increasing production towards 450,000 barrels per day in 2026.
And this in projects that has an internal rate of return of 10% or higher in a $35 oil price scenario. In 2020, we reduced the capital spend compared to 2019 and plan to invest $1,500,000,000 in CapEx. The main contributors will be Valhall with continued investments in wells and potentially the Hud redevelopment project pending final investment decision. In addition, we plan to invest in Arfuhl and the Alvheim area and of course also Phase 2 of Johan Sverdrup. Looking at these numbers, it's, of course, also important to remember that these are pretax figures and that 89.6% are recovered through tax depreciation over 6 years.
Now Carlos started the day talking about the duality of climate change and the role of an oil and gas company in the energy transition. And as a responsible operator, we also need to consider the financial risks related to climate change. One way that we do this in Aker BP is that we test all the investments that you saw on the previous page against the rising cost of carbon emissions. In fact, in Aker BP, we test investments using a cost of carbon emissions, which is in line with the International Energy Agency's sustainable development scenario that Aker that Karl had talked about. Aker BP pays for CO2 quotas in accordance with EU's emission trading scheme in addition to paying Norwegian CO2 taxes.
For 2020, we test investments against the total price of $90 per tonne of CO2 emitted, and this is further increased towards 2,030. And of course, these costs are also included in our production cost profiles for each of the producing fields. Kjetil has already stated. We are maintaining our goal of $7 per barrel of production cost by 2023, although that we have moved the Nuaka project out in time. In addition, we see further improvement potential, and the ambition is to further decrease costs as we realize the impact of our improvement agenda.
For 2019, it was great to see that we managed to deliver on our cost target and that we, for 2020, now plan to follow the projected cost development. This means that we expect to reduce OpEx per barrel with roughly 20% and plan to spend roughly $10 per barrel in production costs next year or this year, 2020. Plans for abandonment expenditure is continuously being optimized in Aker BP. In 2019, we had strong performance on the scope executed, and at the same time, we pushed P and A work at Valhall out in time in order to focus on more value creating activities. Based on the positive experiences that we have seen on top side removals and also the learning curve on P and A, we can see that the overall expected spend related to abandonment has come down with roughly $150,000,000 in the period from 2019 to 2023 compared to what we presented at the Capital Markets Day 1 year ago.
Evi has already talked in length about exploration. Two additional points from my side. The longer term plan for exploration spend remains the same, and we expect spend to trend downwards towards $400,000,000 to $450,000,000 per year following today's level at $500,000,000 And again, I just have to say it, although the cost of the exploration program is included in all the profiles, there's no upside included. Okay. To summarize this part.
We believe our portfolio both provides strong cash flow from the existing production and a basis for high profitable growth. The free cash flow generated is substantial. And compared to last year, the short and mid term cash generation has been improved, both through better performance, but also as cost and timing of the Nuaka project has been changed. Our second financial priority is maintaining sufficient financial capacity, And a key part of this is to keep a robust balance sheet with the right amount of leverage combined with good risk management. On the left hand side, you see the development in the company's leverage ratio over the last years.
The uptick in 2019 is mainly driven by large investments in Johan Sverdrup and the Waller Westlake field, both of which came on stream in Q4 2019. The increase has now been muted, and we ended the year with a leverage ratio of 1 point 2. The company governs after what we believe to be a conservative financial framework with the ambition to maintain our investment grade credit profile. We aim to keep a sufficiently large liquidity buffer, hedge short term price risk and our exposure in the Norwegian kroner in a prudent manner and all our assets are insured in the commercial market. As of today, we have in place put options covering percent of our production for the first half of twenty twenty at average strike prices of $54 Brent.
Quick look at our debt facilities. Our total debt capacity is $7,400,000,000 of which we currently have $4,000,000,000 of undrawn capacity on our bank facility. We've also added longer dated bonds to our maturity profile. And at the end of 2019, we reported $3,200,000,000 in net debt. And adjusting for the value of our tax balances, the tax adjusted net debt was 1,000,000,000 And this is my favorite graph.
If we combine the full investment program, the associated production and the return of value through dividends, we can estimate the effect on the balance sheet and our leverage ratio. Even in a sustained $50 scenario, with the assumption of no change in investment level or impact on supplier costs, we would only trend slightly above 1.5 in leverage ratio before the peak of Nuaka investments in 2024. In a $65 oil price scenario, our leverage ratio is estimated to stay at or below 1 throughout the full period. The last element of our financial priorities is related to returning value creation. And before I talk about distributions to shareholders, it's worthwhile also talking a bit about returns to other stakeholders.
The tax system, we believe, is balanced in Norway in the sense that investments that make sense before tax also make sense after tax and vice versa. It's also balanced in the sense that the government takes a fair share of the upside, but they also take a fair share of the risk. And this is especially relevant in periods of volatile oil prices and investments in growth. Cash tax payments in any given year is, of course, highly dependent on commodity prices, but also other external factors such as change in exchange rates. More importantly, cash taxes increase with the profitability of the business.
But on the flip side, as we continue to invest in growth, cash taxes are reduced by the depreciation of tax balances. In January, we set the actual amount for the 3 tax installments to be paid in the first half of twenty twenty. As expected and communicated as part of my Q3 presentation, these are roughly half of the installments paid in the latter part of 2019. This was driven by several things, including changes in oil price, but also the weakening of Norwegian kroner against the U. S.
Dollar. Our ambition is to return value creation to shareholders through dividends in a predictable manner. Currently, we are increasing production. We are driving down costs, and some would argue that our balance sheet has never been more robust. We do not optimize value creation and our value creation plan based on oil prices in any specific year.
Our financial strategy has the objective of maximizing shareholder return through the cycle. In 2020, we proposed to pay $850,000,000 in dividends, and the plan is still to increase this by $100,000,000 per year up to 2023. Now when I summarize the guiding for 2020, most of these numbers has already been indicated throughout my presentation. So unless you have been sleeping, there should be no major surprises. In 2020, we are increasing production with 36%, and the guiding for the full year is 205,000 to 220,000 barrels per day.
Again, you do need to expect some intra year fluctuations. Production in the 1st and the third quarter is expected to stay within the guiding range. And then in the second quarter, we expect production to be 200,000 to 30,000 barrels below the midpoint of the guiding range due to maintenance work during the summer. In the Q4, we expect to be above the guiding range as we are gradually increasing production from new wells at Marlhall, but also as Kjetil mentioned, Adfruhl Phase 1 is expected to come on stream. We are reducing capital spend with roughly 4%.
And in 2020, we expect to spend 1 point $5,000,000,000 in CapEx, dollars 400,000,000 in exploration expense and $200,000,000 on AbEx. Capital spend will be somewhat front end loaded with roughly 60% spent in the 1st 6 months of the year. We expect production cost to be reduced by roughly 20% versus 2019, down to an average of $10 per barrel. Again, fluctuations throughout the year is to be expected, mainly due to the fluctuating production levels, but also then remember that this is amplified by the fact that extra maintenance work is typically conducted when the production is the lowest. So to sum it all up, we will stick to our capital allocation priorities and the management of these in a holistic manner to maximize returns through the cycle.
2019 has been delivered according to our expectations. And in 2020, we are growing production, reducing spend and increasing dividends. And as we have now agreed to work for a common solution on Noaca, our mid- and longer term plan is more robust
than it was 1 year ago.
Production is set to increase with an average growth rate of 15% from 2019 to 2026. And furthermore, the short and midterm capital spend from 2020 to 2023 is reduced with roughly $2,000,000,000 This means that we will continue to maintain a robust balance sheet as we invest in profitable growth and return value creation to shareholders. With this, I want to hand the word back to Karl Neur for some closing remarks before we move on to Q and A. Thank you.
Thank you, David. It's hard to imagine that you only have been CFO for a year. We call him Professor Tane in Aker BP. So you can use that against him at any given time. I set out today by stating how I look upon the macro environment, the big challenges that are ahead of us in the energy industry and that challenge of both being able to reduce CO2 emissions and sustain energy production.
I talked about how I believe that the Aker BP strategy is still fit for purpose, that it has served us well in good times and in more challenging times. And I believe that Aker BP, both because of its portfolio, its capital structure, our improvement programs and our strategy around value creation is ideally positioned to generate superior shareholder value also in the years to come. I hope that through the day, those messages have been amplified, that you have gotten concrete examples of how we maximize value in the assets, how we actually turn digitalization from ideas to real life projects, how we're able to shorten cycle times from exploration to production and how we're maximizing value creation in the asset and around our assets by applying new technology, aggressive investment aggressively pursuing investment opportunities, but also taking a holistic view on the investment program as such. And I think David summed it up perfectly by summing up our capital allocation strategy, which is basically all about making sure that we generate superior shareholder value through the cycle. By looking at the longer term picture and utilizing a very, very strong balance sheet to ensure that we're not following the fluctuations, but staying proactively ahead.
I hope that you also found that our already, I would say, already the performance today, but even more so probably the challenges and the targets set ahead, driving down costs, increasing efficiency and really leading on the improvement, the digitalization and the shareholder and the value creation across that value chain is further solidified that position. And I hope that you are leaving this room believing as we do that Aker BP is fundamentally about high efficiency, profitable growth and superior value creation through the cycle. And then with that, I think we'll open up for questions and answers. Won't we, Mr. Bakken?
That's correct, Karl. Thank you. I would ask all the speakers to take the stage. And then I have defined a few ground rules. One is that you all have to speak into a microphone if you have a question.
Microphones will be provided. And rule number 2 is one question at a time. And you will be allowed, if you are kind, James, one follow-up question. And then after that, you have to get back in line. Number 3, we also have a web audience and we will accept questions submitted by e mail to irarkerbp.com.
And we will cover those questions to the extent they have not been covered by the questions asked here in the room.
Very strict to date.
Very strict, yes. So with that, do I see a forest of hands? I think we'll take on the back there.
Jurgen Boesch at Nordea Markets. On the negotiations with Equinor and Oaka, are you able to give any scenarios on how the commercial terms will be structured? And are you able to give any hints on when we should expect that to be announced? Thank you. So I won't speculate on commercial terms.
And I've previously been very optimistic as to time lines. I think the climate has a bit changed. So I'm still really up domestic asset timelines.
Okay. Alwyn?
It's Alwyn here from Exane BNP Paribas. I'll just start with 1 on just the technology side and plus the low carbon side as well. Advancing forward, do you see other opportunities for electrification of some of your other platforms that we haven't maybe discussed in great detail together? What and some of the other sort of key solutions you might think about employing over the next, say, 4 or 5 years? And beyond that, on the financial side, there's quite a wide range of free cash flow for
That's question number 2?
Yes, that's question number 2, sorry.
We'll come back to that later.
I'll make sure I stick to the
rules, Kieto. You're a lot bigger than me. Yes, question number 2. On the free cash flow side for 2020.
Let's take that after. Let's follow the rules.
You want to do the electrification?
Yes, electrify, yes. No, we have been running studies for the assets. It's not our sort of primary goal due to the sort of threshold and the way that we think that energy efficiency in our current setup is a really important place to start. I think some of the assets might have different opportunities if you're looking at area collaboration around new solutions. And if possible, that will help lowering the threshold for some of the assets.
Okay. Question number 2?
Or a
follow-up to number 1.
Okay. Regarding the free cash flow estimates for this year on between $50 $80 per barrel, it's quite a wide range, considering the first half of the year's cash taxes are fixed and you usually do some commodity hedging. Can you perhaps explain that and maybe going forward as well?
Yes. So I think you need to at least differentiate between the sanctioned only scenario and sort of the full scenario. So I think if you look at if you're referring to sort of Page 67 in the sanctioned only scenario, of course, that's pretty wide range because most of the CapEx has already been sanctioned already. And we are taking with us, of course, cash taxes from 2019 into the year. So that's why that's sort of a bit artificially wide compared to the 1st scale scenario.
Okay. Then one follow-up. I'm
getting it now.
In which order, I guess, your sort of priority order for project sanctions then for this year, what are the main projects we should look out for FID?
Peter? Yes. I mentioned the whole project. I think that is it has so many important factors to it, not only sanctioning and getting the project running, but it's continued alliances and testing ourselves on, as I said, on the ability to copy the Valladolidis francin and then further develop Vallahull. And then we have other sort of tieback projects that we will mature, as we mentioned, throughout the decision.
So principally, I mean, you will see so hard maturing. There's also called something called Chameleon East Gecko.
Yes, I
think that's right. Right. Which is a combination of tiebacks on the Alfven field. And then we have so that's probably, if memory serves me right, the DG3 decisions. We might push Tral and Trina into 2020 depending on progress in 2020.
And then there's a number, almost 10, I think, of DG2 decisions ahead of us, meaning 2021 will be a significant more, I would say, impactful year in terms of investment decisions.
I'll just add then that these DG2s that we're both taking concept selections on for tiebacks and also pushing through a DG2 decision. We are looking at what I mentioned on portfolio synergies and how to sequence these to best execute on the asset side but also as a company.
All right. Then it's Anders Holte.
It's Anders Holte from Kepler Cheuvreux. Just going to start at 1 and have a small follow-up.
Let's try to follow the rules, please.
We'll do our best. In any case, so referring to Page 75 on your free cash flow outlook. And I appreciate what you're saying about you want to return to the shareholders through the cycle. But by the looks of it, it seems like you are cash flow deficit even at $80 after dividends all the way throughout until 2024. Does that not give you some source of concern given the investor sentiment where or as of today?
I think, of course, you can look at the graph and deduct dividends and you see where we are in terms of versus oil price scenario. That's very explicitly laid out as part of our goal of being transparent. As I mentioned throughout our presentation, our capital allocation strategy has the goal of maximizing returns through the cycle. And of course, as we invest in profitable growth, this is what the profile looks like.
And then as the quick follow-up on Stagnnes tin. Those reserve numbers seems to be not what you would expect to see if you are looking at the stand alone development that far out. Any comments on that, please?
Well, I can certainly say that we don't have a full agreement to the resource potential in the license. We are several partners, and we're seeing the prospectivity slightly different. Just looking back a couple of years, when we presented Stangustin, we had significantly higher numbers. We've continued maturing the area using data and analysis, and this is the resource potential we as operator data and analysis, and this is the resource potential we, as operator, believe is the correct number. But no, it's not a standalone development potential.
Alvor?
Alvor Nygard from SEB. On gearing, you show sensitivity down to $50 oil, but in a scenario with even lower oil prices, what kind of gearing level or leverage ratio would you start to sweat or sleep at at night? And also what levers would you pull to accommodate that? Would it be phasing on CapEx, phasing of DECOM or touching the dividend ambition?
Well, so I think, first of all, I sleep well at night regardless. But of course, yes, we have simulated 3 oil price scenarios being transparent the way that we did last year. Of course, in a lower oil price scenario, this is also impacting, of course, taxes quite significantly. So you cannot just extrapolate between different oil prices scenarios. And we have not shown various other oil price scenarios here that you could see.
Then, of course, I think it's also very important to realize the fact that what I said during my presentation is that this is the full plan invested, assuming that we don't do anything to our behavior and that the markets don't do anything with their behavior. And of course, if you see a sustained $40 oil price scenario, this would, of course, impact supplier costs, etcetera. And to speculate how we would act, I think what we do, we look at this holistically, and we do what's maximizing value for the shareholders in the longer term. And that's our main concern. And I think for Aker BP and what we have shown in previous years, the ability to be countercyclical.
So you're asking that question from sort of what would you do in a defensive position. I would rather turn it around. And in that type of situation, we would look at what type of opportunities would that type of oil price scenario give a company like Aker BP with the very, very robust balance sheet that we have with $4,000,000,000 of free capacity.
And that being said, there's a significant flexibility in the portfolio because it's not just one big project, right? There are multiple of those projects and they'll move along the whole range of breakevens from down to 10% and up to 35%, 40%. So there's a lot of flexibility in that going forward. Of course, from an industry perspective, let's hope we don't have a sustained $40 scenario for 10 years, definitely from a Norwegian perspective, taxpayer perspective. But from a company perspective, I'm sure that, that would open up a lot of opportunities.
Thank you. James?
Thank you. It's James Thompson from JPMorgan. Just wanted to flesh out a little bit on Nuwako, if that's possible. You pushed the production out a little bit, but it also looks like CapEx has come down quite a lot, but breakevens haven't seemed to change. Maybe that we're waiting for a revision, but maybe you could just talk a little bit about the moving parts, seeing as there's now potentially more platforms but slightly lower CapEx, or at least that's how it looks.
Yes. So let me add a few comments to the technical side of things, right? So what's really happened is that while collaborating with Equinor on a common technical solutions, we have both identified improvements in the area, distributing production assets, but also distributing processing capacity. We looked about optimization of the assets in that area. There were 12 different reservoirs in the area.
And that has basically led us to find a different way of actually developing it. As I said in my presentation, a lot of credit to Equinor for the work that has been done. And then of course, there are more work to be done, significant work to be done. This is, I would say, DG1 plus type of estimates, and we will still need to do a lot of engineering activity to get to a DG2 level. I'd also say that when we look at that from an Aker BP perspective, we also see that there are significant opportunities to improve.
Thank you. My unrelated follow-up. Just wanted to understand the terminology you're using when you're talking about the Barents Sea exploration because you sort of you talked about it, you repeatedly talked about it being your sort of final drill out. Is that just because these are the prospects that are ready for drill out? Or is this because this is really the last time you want to look at the area?
You can start, then I can follow-up.
Sure. Getting now. No, no. No, no. We had a large campaign identified early on.
And stungsten, as I said, is a firm well commitment from the 23rd round. So that's many, many years ago. So this was defined as wells that we wanted to drill and then it's added on BASK last year and related to Alta Gutta. But we haven't had successes so far. It's been disappointing, and I said that last year as well.
And so we kind of in order to continue, we would have to have some successes this year. If not, we'll have to take a step back and reevaluate all the wells that we drilled and what really is the impact. We also haven't succeeded being an operator for discovery in the region, and we have a lot of exciting opportunity close to our infrastructure and also close to other infrastructure on the shelf. And that's kind of the strategy that we had the last 3 years is to maximize that kind of value. So that's why I'm a little uncertain about the way further and it depends kind of the results.
If we get a huge discovery, of course, we'll continue on.
So I think this is really about risk reward type of balance, right? Looking at what's actually been achieved by us and by others, looking at what kind of capital we can deploy and where we can get most value. I have ended our presentation saying this is about superior shareholder value. And right now, at least it's my opinion that such capital is best deployed elsewhere.
Very clear. Thank you very much.
Okay. Now I have Teodor and then Johan and then Sassy. And if there are others, there is one. Okay. There you are.
Okay, sorry.
Taylor, this is Barto, Juan Marcus. One question on Slidellrupp. I noticed that you said 660,000 barrels plus per day. I haven't seen a plus before. How should we interpret that?
I think I spent my time talking about getting control over the core, the assets, the operational set of the organization. And then if you have that and you have the right type of improvement initiatives and insight, you can really improve our portfolio. And I think that is my belief for Randstad as well. I don't think there are many sort of newly started up facilities that are so defined, so controlled. It's delivering on what we predicted and what we promised.
And I think the upside is there using the type of new technology and digital initiatives that we have covered today, operational excellence in a new organization with a new facility with only a few months of production, we're bound to find improvement potentials in the bottlenecking. So I'm optimistic on behalf of Equinor and as Anders.
And let me add, I mean, I think Equinor is doing an amazing job here, both in the development but also from the start up. So the way we look at Bondi is we're really optimistic in terms of production attainment and also the possibilities of debottlenecking. And the plus is just lack of quantification.
Okay. So we should say, Classroom 700 something on Platouen.
All right.
That's fair. I won't follow-up.
You can, but I won't.
Okay. I won't follow-up on the Ostangnes. Tinne definitely with the Omnicepte. It looks like a pretty thin resource estimate. So what would be the commercial threshold for a stand alone development almost in Russia?
That's a
good question. That's a good question.
That's a
good question.
That's a good question.
That's a good question to answer. Let's say given success with the volume range that we have today, we would have to prove up several more prospects in that range, at least 5 or 6 to get an economic threshold for that area because we're so far out from the shore. I think I previously said for Area C, the Jokosna, we needed 250,000,000 barrels. We need significantly higher number to make this fly this far out.
Then it's Johan.
Thank you again for being that transparent with all your guidances. It's very clear on our end. I appreciate that I will have the first question, which is a follow-up on Noaca. And it's good to see that there is impetus there. If I'm looking at so the Slide 54, which is showing potential development plan, as I was told during the break basically, it is a picture, a diagram which is produced by Equinor.
Does this mean that basically you have accepted the idea that Equinor will be operator of NOACA. And in the context of the fact that M and A is back with the announcement you made this morning also on a small scale, Should we expect, knowing that Equinor is potentially based on this, the operator of Noah Car, should we expect more on the business development angle, more license sort of transfer between partners in OAKA?
It's an extremely way of actually posing that question. Thank you. So one operating ship haven't been concluded nor have other commercial terms. Who's made the slide? As I said, this is a joint effort, which has been going on for a bit of time.
When it comes to M and A, it's never really left the radar. We've just been incredibly disciplined. And when we have seen M and A processes going on where the value accretive potential has been less than what we could see in organic portfolio, we have not been participating and that's been the case for a long time now. This deal was triggered by 2 main items. The first one is the recreation of an area strategy around Skav, which Kjetil ran you through.
And it's actually quite interesting to see that we started out when we had basically Skav. Now we have Skav, Afl, Grosel, Schreck, Alvenor and then hopefully Nidog, right? And potentially even right? So you can actually see a string of tiebacks and it's important for us to be a part of that and utilize our alliances to make sure that we can control that flow into the assets. And then of course, we needed to farm down from Alunort because we had 100% and we're shortly going to drill an exploration well.
So M and A has never left. We've just been incredibly disciplined.
So and maybe a very second question, very different but quick on that one. Clearly, improvement is a key pillar of your value creation strategy. And again, you are being very transparent on targets. If I'm looking just at the carbon emission intensity of your portfolio, you are not being very firm on the direction of travel because you are already basically below this 5 kilo of CO2 equivalent per barrel. Can you provide some color on this, please?
Yes. That's a difficult question. So I've agreed with these guys, but any difficult question, they'll do.
Who wants to volunteer?
I can start, right? So if you're stating that we're already below 5 already. So in 2019, we had an equity emission of roughly 7 kilos per barrel. And of course, with Johan Sverdrup ramping up, adding sort of low emission barrels into our portfolio, that improves, of course, our overall portfolio. We have a goal of driving down below 5.
And yes, we think that we might achieve it already this year. But of course, we also need to use energy to increase production from other assets. So I think the whole point of our presentation on this topic is that, yes, it's nice to electrify assets when you do it on a greenfield basis. But what we need to focus on is to reduce the emissions of the assets which aren't electrified. And that's the work that Sjetel and Karl has already talked about.
So a clear path going through the next 10 years, we don't have that yet on emissions. But of course, it's a clear ambition for us to accumulate the type of initiatives that Sietel and Karl talked about in order to keep driving that down.
It's good to hear.
And honestly, we're not really sure what is we're able to achieve. I set out in my presentation stating that I had been surprised as to the level of reduction we've been able to do by implementing, I would say, very low in terms of capital spend algorithms or other changes to operational procedure. And there are lots of these measures in the pipeline for the time being. And it's almost like you open Pandora's box. So it's almost like kind of ended into a space where a lot of focus had been on production optimization, production attainment, production efficiency, etcetera, etcetera.
And all of a sudden, you're now getting a toolbox where you can aggressively pursue energy efficiency with the same set of measures. So we set out by starting as we did today, And there are 15, 20 projects in the pipeline, none of them have a high CapEx capacity. Then the other side of things, we're also measuring everything that has to do with our drilling activity, with our mobile units, PSVs, etcetera. That goes into our holding as well, right? So that means that we're working with ship owners to change the way they actually optimize, right?
This has to do with simple stuff like routing. Why do you want to run 15 knots when you don't need the toolkit until 18 to 20 hours later, right? You can run at 9 and you save 50% of the fuel, right? We're working with Maersk and Odfjell to minimize consumption on the mobile units. So there are many of these targets.
And I think next year when we meet at this time, we'll be able to much more accurately set out how that curve is to be look will look going forward.
Just to add that we are in sort of a softer side. We are mobilizing the whole organization now and both the curiosity and creativity when we are getting more conscious about both small, medium and large opportunities has surprised us. So again, we don't know, but we see that it's really going in the right direction.
Thank you again.
Okay. Now it's Sassy, Karl Friedrich and Chris and Duncan.
It's Syshkin from Morgan Stanley. Just a couple
of You need to keep it very close to your mouth on the the guys on the web won't hear you.
It's Seshjan from Morgan Stanley. Just a couple of small clarifications. Firstly, on the exploration CapEx for 2020, you're now participating in 10 wells like previously in 2019 for 2016, but yet the cost is the same. Is it purely because of the higher percentage of balance to EBITs? Or is there anything else?
Well, I could start. Expex is also within Expex, we also cover fuel development cost. So the cost so we have an increasing amount of fuel development cost next year compared to what we had this year. So that's one difference. But we're also drilling a few more expensive wells next year.
Like the Alvyn Northeast is quite expensive because we added a test to it. But we're doing that, of course, because it will go straight into Alvyn North field development as important information. And then the wells in the Barents Sea like Sungnesten and Shenzhou, they have H2S risk associated with them, which increases the cost significantly of drilling those wells. So that's why way of drilling those wells. So that's why Drill X is higher on those wells.
Yes. And if I may add also, we have actually outlined the split between well cost, field evaluation and other costs in one of the slides. You can see that actually the well cost is going down. But also given the discoveries that we had last year, the field evaluation costs are expected to increase a bit in order to mature those discoveries. And then of course, an element that you didn't touch upon, Eeva, but of course, the relative ownership share in each of the wells is course, also very important.
So the Alvenur well that Northeast well that Debbie talked about, we have a high ownership share in the rights. So that also influence.
And a small follow-up on when you talk $60 is it nominal or real after 2026?
Sorry, when you talk
$60 oil or $80 oil in your scenarios. Is that
It's real.
Karl Friedrich is next.
Thank you for a very good presentation. You
talked about M
and A and you talked about the focus being on the quality of the assets. Do you see that most of the quality transactions has already been executed on. And as such, there are few assets for you to acquire as of now. And the follow-up is then, will you at some point start to look beyond the Norwegian continental shelf, you'll look into U. K, Denmark, the Netherlands?
Yes. Okay. So when it comes to have all the quality transactions been done, I think this is the question you always ask yourself, right? So there's a wave of transactions and then you've got people like myself looking at the map saying, well, now the quality of transaction has been done. And then 5 years later, you've got another wave of transactions.
So no, I don't believe that the all the quality assets are on. There are several assets out there that are high on our list to get our hands on and they're not been transacted yet. 2nd, I think you're also seeing a bit of a change in terms of ownership, but also investor sentiment, right? Lots of these initial PE backed entities are now looking at exits. And it's unclear how they will achieve such exits.
And that means that there could be other opportunities opening up that have not really been on the market for yes, historically. In terms of your second question, one of the statements that Evi made is the force close actually straddling the U. K. So at least, of course, in these scenarios where we see opportunity directly linked to our operations on the Norwegian continental shelf, we're, of course, pursuing them in order to maximize value. I think that should come as no surprise to anybody.
And then apart from that, our focus really now is on making sure that we create value for the asset base we have, that we add value add assets into this asset base that are creating value and making sure that we maximize the quality of those assets. We will not the point I'm trying to make is that we will not run after transactions where we don't really see a fundamental underlying value. And having done quite a few of them now over the last few years, we actually see what works and what does not work. So this is no longer a hypothetical exercise. It's actually based on empirical data and what we can actually turn into value.
That's good to hear.
Thank you. Yes. Then it's Chris and Duncan. And after Duncan, are there any others who have questions? Okay.
Then we'll probably close off after Duncan. So I'll put Chris first.
Thank you. Can I ask about where you think the next hub after Noaka is likely to come from? Because if you're thinking about it, do you consume the use of free cash flow NOAACA is going to generate, then you need to be thinking about it now. And if, as Evi said, the Barents is difficult, it hasn't been the success that you might have hoped. And also, I'd point out you're not operator in a loss of the Barents wells.
And so much of the success you've talked about has been because you're operator of the assets, and you can actually control them, all the stuff about digitization, the manufacturing business you referred to. If the balance doesn't work, if you've got Nuaka over the line, where's what's next after Nuaka now?
I think that's a really good question. So one of the issues that we have on the Norwegian plant landscape is that if you look at the exploration portfolio, not even on Nuaka BP, but all the companies, right, it's hard to see that there are these big field developments opportunities out there, right? But then again, we said the same just before we discovered Johan Sartrup. And it's always looking like we're a bit pessimistic, right? So we have said, okay, I remember a few years back, we said, well, this is probably light side on Norwegian continental shelf and what do we do with the window industry, etcetera, etcetera.
And then came a slew of field developments, Johan Castberg, Johan Sadrup, etcetera, etcetera. So what I'm trying to focus in is fine. Yes, we don't see them now, but we're looking at the prospective areas. We're testing the basins. And then whether that will come into Aker BP portfolio for an exploration target, that's through the ZEB route or through an M and A, I really couldn't kill us.
So what we're really trying to do is to find or actually position ourselves so that we are able to capitalize on the opportunities should they arise. And of course, should they not arise? Well, as we've said, our mission is to maximize the value creation of the asset base we actually have. And I'm pretty certain that with the success and the team behind EVI, if there is something yet to be found on a Norwegian company on the shelf, I'm pretty confident that we'll be a part of it.
Can I have one quick follow-up as well, because everyone else has had one? If you took your CO2 number and added on the CO2 emissions from your suppliers directly related to activities for you, what would that number be? And how are you going to incentivize your suppliers to reduce their emissions? Because arguably, you should be reporting not just your emissions, but all the emissions related to everything people do for you. Can I ask you what that number is?
And are you we're going to see targets from you about how the total emissions can reduce over the next 5 years?
Okay. Really good question. I feel a really fundamental question too. I set out in my presentation saying we shouldn't really kind of just focus on ourselves. We should really kind of look at what would actually minimize CO2 emissions on a global scale, right?
And your discussion around CO2 emissions in the value chain is fundamentally a part of it. I don't have a really good answer to you, so we'll figure out the number and get back to you. But then we are working on these issues with our alliance partners. I mentioned the work going on with Odfjell, the ship owners. We're talking about maximizing energy efficiency in the digital program.
Kjetil talked about Twammo and how to use maximize value from those contracts moving from a kind of an hour based contract into a service based contract. So there are a number of these initiatives where the whole idea is to minimize waste. And to me, energy waste, time waste, money waste is just waste. It needs to go. And that's the way we're looking at it fundamentally.
So we're trying to turn waste removal into incentives for our vendors. Whether that waste originating from inefficient energy use or time use is almost irrelevant. That will need to be converted into some sort of commercial driver in order to ensure that we can take it out. What I don't believe we're able to do is to go into our vendors and order them to do stuff. So we will need to work with them as one team to ensure that we're incentivizing them to create lasting changes, not just one offs.
So you're not going to find Alker BP incentivizing some sort of subsea installation vessel to buy trees in Africa. But you are going to see us working with these installation vessels to minimize the CO2 output.
And just to add that in the alliances, we are sort of developing the agreements. And I mentioned that we're discussing the common drivers and the value drivers now being basis for many of these drivers or agreements have both value increase. It has emissions into it. So it's a lot more than the classical contractor operator agreements in the alliances.
Then it's Duncan. And after that, we will be rounding off. We do have 3 questions from the web, but I believe that they have mainly been covered already by the other questions. So You believe or you're sure? I'm almost sure.
So we will not take them now, but we'll take them offline And I see that James has one final question, and I'll grant him that after Duncan. Duncan first, please.
Duncan Milligan, Goldman Sachs. Just on the Falhall area and since Falhall West has started up, how have the wells performed? And how have the new technologies improved performance relative to legacy wells, I guess, and also relative to expectations?
Well, they're coming as planned. Date wise, they're producing well and sort of impressing us in some cases. And methodology, not only the speed of it and the efficiency of doing it, but also the effect on the well and the reservoir seems promising. So I think it's a lot of positive indicators around the whole setup and what we are learning together with the Alliance now on this methodology. I think it's
fair to say, Duncan, we actually assume that there will be some sort of trade off between speed and size of these fracs. Size are directly correlatable to connectivity, which is then directly correlated to productivity, right? What we're actually seeing is that we're able to pump as big fracs through the single frac Multifrac as we were through the conventional system. And with a more advanced data management system and more data being extracted, we're actually able to place the fracs at a better place. So that has to do with pumping sequence and how that pre flush goes before the main frac, etcetera, etcetera.
So we're actually surprised by our ability to place as big fracs in a lot shorter time. And then of course, this is a long time. I mean, it takes a long time for you to actually see how that frac is performing, right? We're talking years down the road before we'll see the ultimate answer. But right now, reserves are up, lengths are up, productivities are up.
It's going way better than we expected.
And just a brief follow-up. On the Valhall area, clearly, you've got hold of Balsby sanctioned this year, but the level of kind of CapEx for the drilling and effectively kind of keeping the base stable, could you give some indications to how you see that over the coming years?
Yes. Okay. So the first one is probably the lower HUD redevelopment, WPPRs, I will apologize. So many abbreviations that it's hard to track. So that is basically the reservoir below the Tor formation, which is the main Valhall formation.
And right now, I think we're talking about 7 wells, maybe up to 15, which is the next in line on the field center, and that will take up the capacity of that field center probably another year, year and a half. Following that, we're talking about multilaterals. We're actually testing multilaterals now for the first time at the Waller and Frankfurt, which will reduce the target size we can go after. And now we're talking about another 20 to 30 wells. So actually, the hopper looks pretty interesting.
And then we have the Miocene, which is a shallow formation with significant in place volumes, but tight. That means high porosity, but less connectivity. We're also going to test that in 2021, yes. And if that is a success, then this is a formation that is both over the Vallhans field center area, but also predominant further south, inclusive of the hot area. And here you're talking about 1,000,000,000,000 and a half barrels in place.
So there's lots of opportunities for new technology. This is one of the reasons we're driving so hard at this tight rock technology that we're now going after, both in Valhall, but also in other areas. Thank you very much.
And then last question, James?
There we go. Thank you very much, Christoph, for the close-up question. I couldn't leave this presentation, I don't think, without asking a question about spot. It was a genuinely fantastic bit of technology. I think probably everyone in the room agrees.
I just wondered if you could frame the opportunity set really. How many spots are you going to buy? How many puppies are you going to have over the next few years? Are they going on every asset? Just really help us understand the opportunity of that technology.
Yes. I don't think they copulate, so I don't know how many pumpers we get. But now we have at least 2 for the time being. We're going to test them on Skalf and it's a part actually of our robotics testing program. So this is one of the vehicles.
There will be a crawler that will be tested, which will be a work platform and sensing platform. Surface coating and renewal platform, which will actually be able to coat and remove painting on the FPSO hull while in operations far more efficiently. We ran our 1st quadcopter type of thing inside a tank and actually run a full inspection round, certify the tank, put it back in production without any humans being in place. So for us, it's a part of a road where we're trying to get as much of the inspection work as we possibly can into the hands of sensors and technology and then retaining the humans for doing the difficult bits and pieces, right? So the experiment you saw here today is a basic sensor package.
It's a sound, testing different microphones to see if the what has the best effect. There is an IR measure, which will give you methane readings. There are 10 HD 4 ks stereo cameras, which will allow you to update 3 d models in real time. I mean, it's actually amazing to see the possibilities of the technology. Now the robot itself is really not the key.
So it's a nice gimmick and it's a good photo opportunity. And I hope you posted LottoSnap. The real thing is how you connect that sensor package back into your operations. And that is the contextualization, lenation and the whole data platform is the basic thing, right? So you don't have a live twin, yes, you'll do nice stuff like inspecting flare tips with quadcopters and whatnot, cool, but it's not really changing your mode of operations.
It's when you get the data to flow, get them to be liberated, analyze real time and act it on, then you have a possibility. That's why we started with the data and spent about 2 years getting our data infrastructure in place. That means that we can now move extremely quickly on platforms like this and just connect them directly into CDF, and all of a sudden, we have all the data at our fingertips.
But here as well, I guess, the right answer to that is that we don't know how many dogs we're going to end up with. We'll be doing all the right things to find out. A bunch.
Thank you. And with that, I think we'll end. Welcome to this event. I hope you enjoyed yourself and I apologize to those sitting in the back. Next year, we will have far more cheers.
Thank you. There will now be lunch, mingling lunch for the foyer somewhere.
Yes. Outside.
Thank you, guys. Thank you.