Government steps on the gas

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Oil & Energy Minister Ola Borten Moe remains as bullish as ever in his drive to step up oil and gas exploration and production in Norway’s Arctic areas. Despite low gas prices and opposition from both industry professionals and environmentalists, Moe and his government colleagues are poised to open up Norway’s newly defined southeastern portion of the Barents Sea for petroleum activity.

Oil & Energy Minister Ola Borten from the otherwise environmentally oriented Center Party was in the northern city of Hammerfest on Monday when he announced plans to open up Norway's southeastern portion of the Barents Sea to oil and gas exploration and development. PHOTO: Olje- og energi departementet

Oil & Energy Minister Ola Borten from the otherwise environmentally oriented Center Party was in the northern city of Hammerfest on Monday when he announced plans to open up Norway’s southeastern portion of the Barents Sea to oil and gas exploration and development. PHOTO: Olje- og energi departementet

Moe announced the government’s plan, which will be formally presented on Friday, while attending and speaking at the Barents Sea Conference & Exhibition in the northern city of Hammerfest. The location was far from coincidental: Hammerfest has become a center of offshore petroleum activity and a city where an estimated 1,200 new jobs related to oil and gas already have been created, not least because of gas coming from the offshore Snøhvit (Snow White) field.

Now Moe wants to fuel creation of more jobs in Northern Norway, a region where he said the petroleum industry “is becoming increasingly important.” Opening more of its offshore areas to oil and gas exploration and eventual production “will provide further opportunities, particularly for Finnmark County,” he said.

Moe also claimed to be making history, since the planned opening of Barents Southeast marks the first time an entirely new area has been opened for petroleum activity for nearly 20 years. Moe said the move will “boost value creation and employment across the country.”

Skeptics galore
Others weren’t so sure, arguing that low gas prices at present don’t provide much incentive for oil and gas companies to spend the billions needed to search for it and extract it in the Barents. Most of the petroleum resources in the Barents are believed to consist of gas, not better-paying oil, and development of the shale gas industry in the US has turned the global gas market upside down. Prices for gas don’t justify the investment needed in the harsh and remote environment of the Barents Sea.

“There will be extremely high costs associated with extracting gas from this area compared with other major gas discoveries around the world,” Lars Henrik Røren, and analyst at SEB, told newspaper Dagens Næringsliv (DN). He doesn’t expect any discoveries in Barents Southeast before 2025-2027 at the earliest.

Norwegian petroleum authorities have estimated that Barents Southeast may contain as much as 3.5 billion barrels of oil or oil equivalents, but only around 15 percent of it actually oil. The area is also full of environmental challenges, from rough weather, polar low pressure systems and problems with icing to a lack of oil spill preparedness and even satellite coverage. Officials at Norway’s climate and pollution directorate Klif have cautioned against moving too quickly in developing petroleum activity there.

Moe was nonetheless wasting no time in prodding along what’s expected to be Norway’s next major source of wealth. It’s only been two years since Norway gained firm rights to the area, after decades of territorial disputes with Russia and the former Soviet Union were settled. Moe’s announcement also came just a day after the government’s dominant Labour Party agreed to move forward with prospects for oil exploration and production off Lofoten, Vesterålen and Senja, scenic areas where Moe also has promoted petroleum activity but had to give it up because of opposition from with his own Center Party.

Views and News from Norway/Nina Berglund

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