NEWS ANALYSIS: It’s been less than two weeks since a major lawsuit popularly called “The People vs Arctic Oil” drew to a close in Oslo. Statoil didn’t wait for a verdict to move forward on Tuesday with more Arctic oil development that environmentalists promptly called “crazy.” As Norway’s oil minister also moved to open new areas of the Arctic to oil exploration, there’s little doubt oil will keep fueling Norway’s economy for years to come, no matter what.
The lawsuit seeks to halt more oil exploration and ultimately more production. It began, however, with state attorneys defending Norway’s oil industry, and all but ridiculing the environmental organizations, professors, grandparents and many others who acted as plaintiffs. State defense attorneys claimed the lawsuit never should have made it into court, calling it an attempt to override Norway’s democracy and the authority of Parliament to authorize and exercise Norway’s right to develop its oil and gas resources for the common good.
The debate over Norway’s oil industry has gone on for years but is getting noisier. Oil and gas have brought the country enormous wealth and prosperity, but the nature of the business generates carbon emissions and thus negates or at least offsets Norway’s other efforts to reduce them, to reverse climate change. A report last month from accounting and consultancy firm PwC showed that only Saudi Arabia, Brazil, Mexico and Argentina score worse than Norway in the economic restructuring needed to become a low-carbon economy. Norway’s failure to cut its carbon emissions, because of political refusal to rein in the oil industry, also risks ruining the country’s reputation as an advocate of efforts to reverse climate change. While it sends money abroad to help other countries cut emissions, it’s still unable to sufficiently cut emissions at home.
Ministerial support for oil
Statoil is making efforts of its own to diversify from production of fossil fuels to sources of renewable energy, and recently announced plans for the biggest offshore windmill park ever built. Its instantly controversial decision announced Tuesday to also develop a low-cost version of the Johan Castberg oil field, though, means it will remain an oil producer for decades more, and that Norway will keep the wells pumping and churning out emissions.
Last week, when Statoil held its annual Høstkonferanse (Autumn Conference) in Oslo, the company presented the International Energy Agency’s annual report on the outlook for the global energy market. The report poses various changes in and challenges to the oil industry, but Oil & Energy Minister Terje Søviknes was among those defending Norwegian oil and gas once again. He referred to the majority in Paliament that still supports the oil and gas industry, and claimed Norwegian oil policy will continue as before.
Søviknes was also on hand Tuesday for Statoil’s formal announcement of the Castberg project, calling oil and gas “Norway’s greatest business.” (photo at right) He praised Statoil’s work on the project along with its partners for letting it “ripen” into the new plans for construction and operation.
Søviknes also moved forward on Tuesday with Norway’s controversial 24th licensing round for more offshore exploration, in defiance of the lawsuit against the state. Søviknes even stressed how the new licensing round, which attracted less than half the bidders of the 23rd round, is aimed mostly at exploring new areas of the Arctic where no drillers have gone before. He called such licensing rounds “important for long-term access to resources, activity and value creation in the petroleum business.”
For a list of the 11 bidders, click here (external link, in Norwegian, but scroll to the end for the names of those bidding, including Norske Shell and Idemitsu.)
As Søviknes keeps claiming that the world needs Norway’s oil and gas, another rise in the price of Norway’s North Sea Brent crude oil also boosted the Oslo Stock Exchange last week. State statistics bureau SSB, getting back to business after weeks of internal drama, also presented a report suggesting that rising oil prices and industry restructuring can set off a new oil boom. SSB noted that while oil investments have fallen and thousands have lost their jobs, the oil industry bottomed out in Norway this year and investments will rise. That can allow Norway’s economic recovery and upturn to continue.
Statoil’s announcement Tuesday that it will invest NOK 49 billion to develop the large Johan Castberg oil field in the Barents Sea confirms SSB’s predictions. Statoil has dramatically cut development costs and altered original plans, but Castberg is now expected to start producing oil at sea by 2022. That infuriated environmental and climate activists.
“It’s utterly and completely crazy to invest in a project that will commit Norway to creating enormous carbon emissions over the next 30 years,” claimed Silje Ask Lundberg, leader of Naturvernforbundet, Norway’s chapter of Friends of the Earth. She and many others fear that Statoil’s cost-cutting on the project, which includes dropping plans to electrify operations on the field and using gas turbines instead, will lead to “cheap solutions” that can boost emissions and raise pollution concerns in the sensitive Arctic.
“This will torpedo Norwegian climate goals and contribute to dangerous climate change,” declared Gaute Eiterjord, deputy leader of the environmental organization Natur og Ungdom (Nature and Youth). He had hoped all the problems at the Goliat project in the Arctic would have scared off more oil investment in the Barents, and he fears for fish in the area along with accidents that can be caused by rough weather and winter darkness .
Frederic Hauge, Norway’s veteran environmental activist and leader of Bellona, is also upset and questions Statoil’s claim that the Castberg field can be profitable at an oil price below USD 35. “I fear that this will be a case of showing that they haven’t learned from the Goliat experience and other scandals,” Hauge told Norwegian Broadcasting (NRK). “In addition they’re ready to launch production in one of the world’s most environmentally sensitive areas and one of the world’s greatest sources of seafood. Castberg is a major development that will punch holes in the wheels of measures meant to reverse climate change.”
More protests against Arctic oil in general and Statoil’s Castberg project in particular are sure to come. Meanwhile its proponents argue that Norway’s economic future is at stake, meaning the debate over Norway’s oil industry will continue as well.