Lawmaker Pressure Builds on Statoil to Power Fields From Land

Norwegian lawmakers are increasing pressure on Statoil ASA (STL) and other companies to power four North Sea fields from land, risking further delays to the development of the biggest oil discovery in decades.

Parliamentarians are warning Statoil it will need to prepare for tapping electricity from land for the other fields as it puts together a development plan for the Johan Sverdrup field to be submitted next year to the legislature.

“We could send the bill back,” said Terje Aasland, energy spokesman and lawmaker for Labor, Norway’s biggest opposition party. Any plan should “include an answer to the issue of a regional solution,” laying out how three nearby fields will be powered from land, he said.

Statoil and partners on Sverdrup, which could be Norway’s biggest find since 1974 holding 2.9 billion barrels, have said the first phase will use land-power without including the nearby Edvard Grieg, Ivar Aasen and Gina Krog fields. That drew a rebuke from opposition politicians who are seeking to cut greenhouse-gas emissions from offshore production, which contributed more than 25 percent of Norway’s 2012 emissions.

Parliament’s Committee on Energy and the Environment today held a closed hearing to question representatives from Statoil, Lundin Petroleum AB (LUPE), Det Norske Oljeselskap ASA (DETNOR) and Petroleum and Energy Minister Tord Lien as they seek to gather more information on the disparity in cost estimates for electrification and other issues, Aasland said.

Year’s Delay

The opposition Socialist Left Party last month presented a proposal to parliament that would require the government to make sure the Sverdrup plan includes land-power solutions for the three other fields. The proposal will be examined by parliament on June 12.

Changing the concept for Sverdrup could lead to a year’s delay and a loss in current value of 20 billion kroner for the project, Ivar Aasheim, senior vice president for field development in Norway, said in a phone interview today after presenting at the hearing.

Petroleum Minister Tord Lien also warned parliament against instructing the companies to change their decision, saying it would delay possible contracts for the Norwegian supplier industry. The proposal from the Socialist Left “involves a change of practice that will give an unfortunate signal effect for the framework conditions on the Norwegian shelf,” he said in a document published on the ministry’s website.

Differing Estimates

Statoil, the operator of Sverdrup and Gina Krog, has said it will cost as much as 13.3 billion kroner ($2.3 billion) to power all four from land with a 200-megawatt cable. That means the cost of reducing emissions by 1 ton could reach 2,300 kroner, compared to emission fees of about 450 kroner a ton, according to the oil ministry. An April report by consultant Add Energy Group AS put the total costs much lower at 3 billion kroner, or 40 kroner a ton for reduced emissions.

Offshore fields are typically powered by gas turbines that are installed on the platforms. Norway’s Environment Agency earlier this year said that “powerful and quick” cuts are needed to meet a 2020 goal of reducing emissions by 30 percent from 1990 levels, two-thirds of which must come domestically. Norway in 2012 emitted 52.7 million tons of carbon equivalents, up 4.6 percent from 1990.

Concept Selection

Pushing the partners to include surrounding electrification in the Sverdrup plan could win a majority in parliament, including from the Liberals and Christian Democrats, which support the Conservative led-government, Labor’s Aasland said.

The oil companies in February proposed a development concept for Sverdrup that includes an 80-megawatt power cable from land at a cost of about 5.5 billion kroner in the first phase. Adding power capacity to supply the other fields in the area, called the Utsira High, remains an option for later phases of Sverdrup, Statoil said. Powering from land will reduce emissions by 60 percent to 70 percent, according to Statoil.

Oil producers are struggling to cope with rising development and exploration costs amid stagnant oil prices. Statoil last year delayed its Johan Castberg oil project in the Barents Sea, shelving $15 billion of investments. Royal Dutch Shell Plc (RDSA), Europe’s biggest oil company, last month put on hold a gas-compression project at Ormen Lange, the Norwegian Sea field that supplies about 20 percent of the U.K.’s requirements.

Sverdrup has already been delayed, and is now scheduled to start production at the end of 2019, a year later than planned. At maximum output toward the mid-2020s, the field will account for a quarter of Norway’s oil production. Lundin’s Grieg field will start production next year, while Det Norske’s Aasen and Statoil’s Krog are planned to start in 2017.

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

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Jonas Bergman, Alastair Reed

Press spacebar to pause and continue. Press esc to stop.

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.