Statoil Says Lofoten Ban Hurts Effort to Ease Oil Decline

Statoil ASA (STL), Norway’s biggest oil and gas producer, said the new Conservative-led government’s decision to sacrifice exploration off the Lofoten islands will deny the country a chance to revive flagging production.

Incoming Prime Minister Erna Solberg, whose Conservatives agreed to form a government with the Progress Party, said yesterday she won’t seek to open areas off the environmentally sensitive islands in the next four years, keeping as much as 2.3 billion barrels of oil equivalent in the ground.

“Production will fall quickly after 2025 if we don’t make new, big discoveries” and may slump as much as 50 percent by 2030, Oerjan Heradstveit, a spokesman for Statoil, said today by telephone. “It’s all the more important for the industry that the government considers other long-term measures that can secure the Norwegian shelf’s competitiveness.”

Norway expects crude-oil production, which comes mainly from aging fields in the North Sea, to fall for a 13th consecutive year in 2013 to less than half its peak in 2000. Total petroleum output will drop 13 percent. While oil volumes will subsequently be bolstered by new fields such as Johan Sverdrup, output will resume its decline in 10 years’ time if new finds aren’t made, according to consultants Rystad Energy.

Change Tack

Before the Sept. 9 election, the Conservative and Progress parties had called for a study into the potential impact of exploration off the Lofoten islands, a first step to opening them up. After changing tack and keeping Lofoten off limits, as well as other areas off Norway’s coast and waters around the Arctic Jan Mayen island, they yesterday secured parliamentary support from the smaller Liberal Party and Christian Democrats.

The area hosts the world’s biggest cold-water coral reef as well as mainland Europe’s biggest seabird colony, according to WWF. It’s also a breeding ground for 70 percent of all fish caught in the Norwegian and Barents Seas, as well as sperm whales and seals. Junior partners in the previous Labor-led government managed to block an impact study of Lofoten in 2011.

Norwegian Oil & Gas, a business lobby, dismissed Solberg’s decision as “disappointing and undemocratic,” saying a majority in parliament supported an impact study. Norway’s biggest union, LO, said the move was “very regrettable.”

While Statoil’s Heradstveit declined to detail any concrete measures to boost the competitiveness of Norway’s oil industry, the Stavanger-based company in May criticized the outgoing government’s unexpected decision to raise taxes on oil producers. Statoil listed the tax increase as one reason for delaying the development of its Johan Castberg project.

Exploration Buoyed

Wood Mackenzie Ltd., a research group based in Edinburgh, said it doesn’t expect Solberg’s decision on Lofoten to hurt interest in exploration off Norway, buoyed since 2010 by discoveries such as Sverdrup in the North Sea and Castberg in the Arctic Barents Sea. The country also this year decided to open an area previously disputed with Russia.

“We view the Barents as one the most exciting basins for exploration globally, and the northern North Sea still ranks very favorably,” Wood Mackenzie said.

To contact the reporter on this story: Mikael Holter in Oslo at mholter2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.