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Friday, July 19, 2024

Cheers and anger over oil field plan

Statoil’s latest plans for its large Johan Castberg oil field off the coast of Northern Norway have cheered the oil industry, but enraged local officials since they no longer include construction of a land-based terminal. Political and business leaders around the North Cape feel cheated, three years after being told their area would benefit from the jobs and economic development an oil terminal could bring.

Kristina Hansen, the mayor of Honningsvåg, is originally from the Færoe Islands and accustomed to life in usually blustery, remote places. She has welcomed Statoil's plans to build a new oil terminal here at Veidnes in Honningsvåg, believing it will generation economic development. PHOTO: Berglund
Kristina Hansen, mayor of the North Cape community around Honningsvåg, pointed out the area at Veidnes where Statoil had planned to build a terminal tied to its large Johan Castberg oil field offshore. Now, three years after Statoil promised the prospect of hundreds of new jobs, she’s bitterly disappointed that Statoil’s new CEO has dropped or at least suspended plans for a land-based terminal, opting for a cheaper floating production and storage solution instead. PHOTO: Berglund

“It was poor-quality champagne that Statoil treated us to back in 2013, and now comes the hangover,” Stig Hansen, head of local business organization Nordkapp Næringshage, told newspaper Dagens Næringsliv (DN) on Wednesday. He’s bitterly disappointed after Statoil’s CEO Eldar Sætre told an oil industry conference in Sandefjord on Tuesday that Statoil would use a floating production and storage vessel on the Johan Castberg field, instead of sending the field’s oil to a terminal at Veidneset in the community of Nordkapp, not far from from Honningsvåg.

Statoil itself had billed the Veidnes terminal as the start of “a new industrial era” in the far north, and suggested it could make Northern Norway the country’s next large petroleum region. The terminal project was expected to create around 500 jobs during its construction stage and 50 jobs once it was operational.

“The oil terminal would have created even bigger ripple effects locally,” Hansen told DN. “We have fishing and tourism, but need oil to get our youth to move home, and to offer highly educated people good jobs.”

Statoil's planned terminal for oil from the Skrugard field may well be a boon to the community near Honningsvåg. Environmental organizations remained skeptical or opposed to oil exploration and production in sensitive Arctic areas. PHOTO ILLUSTRATION: Statoil
This is what Statoil planned to build for oil from Johan Castberg, formerly known as the Skrugard field and encompassing the Havis and Drivis discoveries between 2011 and 2014. Now local officials’ hopes for jobs and economic development from the terminal have been dashed, and they’re accusing Statoil of failing to share potential wealth from the field with the local community. Environmental organizations, meanwhile, continue to oppose oil exploration and production in sensitive Arctic areas. PHOTO ILLUSTRATION: Statoil

Local mayor Kristina Hansen from the Labour Party was also angry and disappointed by Sætre’s announcement, claiming it severely damaged Statoil’s credibility. Prospects for the terminal had dimmed since the project was first announced, and uncertainty had replaced optimism, but Sætre’s announcement nonetheless came as a blow.

“Oil is supposed to provide a foundation for community development along the coast,” the mayor told DN. “We don’t want Northern Norway to simply be a supplier of natural resources, and that’s what we’ll become if we don’t get a terminal.”

Sætre’s plans for Castberg were met with applause and cheers from others in his audience at the oil industry conference, simply because the company is moving forward with the project instead of scrapping it because of the dive in oil prices. “It’s fantastic news for us that Statoil has faith in developments in the Barents Sea,” Kristin Færøvik of Lundin Petroleum told DN. Lundin has also found oil near Castberg itself, works with Statoil as an oil field partner and now has Statoil as a major shareholder. DN reported that if and when Lundin’s field and others in the area go into production, they may provide enough economies of scale to justify the terminal project.

Statoil CEO Eldar Sætre said he could understand the various reaction to his company's plans for the Castberg field, and conceded that Statoil may have built up expectations that now can't be met. PHOTO: Norsk olje og gass
Statoil CEO Eldar Sætre said he could understand the various reaction to his company’s new plans for the Castberg field, and conceded that Statoil may have built up expectations that now can’t be met. PHOTO: Norsk olje og gass

In the meantime, though, it appears suspended indefinitely, if not scrapped altogether. The Castberg field, located northwest of the North Cape and around 240 kilometers north of Hammerfest, is expected to yield as many as 650 million barrels of oil, but Statoil doesn’t think that’s enough to justify the costs of building and operating a land-based terminal near Honningsvåg. Sætre stressed that Statoil hasn’t ruled out construction of a terminal at a later date, especially if other Barents fields are developed, but that it’s now been separated from the Castberg development itself. Otherwise, he claimed, “we wouldn’t have had any potential” for building out Castberg.

Sætre told DN he could understand there were  “various types of reaction” to Statoil’s decision to move forward on Castberg without a terminal in place. He also conceded that the terminal project announced three years ago “may have created expectations for what we can’t deliver today.” The dive in oil prices has shaken up the entire oil industry, not just Statoil, which nonetheless was awarded the highest number of licenses since 2005 for fields on the Norwegian Continental Shelf this week (external link).  Sætre’s decision on Castberg came down to “whether we have a project, or don’t have a project at all.”

Mayor Kristina Hansen wasn’t satisfied: “That’s not good enough,” she told DN. “Then we can just as well wait with seeing Castberg built out.” As for suggestions a terminal may be built later, she said that “I don’t want more hopes and promises from Statoil, I want guarantees. They’re just pushing a terminal solution out in the blue.”

Stig Hansen of the North Cape business organization accused Sætre and Statoil of bad manners. “We can’t stand on the barricades and defend Statoil (against the protests of environmentalists long opposed to oil and gas exploration and production in the Barents) if we don’t get any positive ripple effects that our oil resources were supposed to bring,” he told DN. “The oil isn’t supposed to be produced so people in Oslo can sit and say they’re creating value. Oil resources must have positive effects locally. We are very dissatisfied that Statoil just wants to come and help itself, and then the value creation occurs other places.” Berglund



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