Green Plan for Norway Oil Fields Threatens Investment, Lien Says

Plans to force the owners of Norway’s biggest oil discovery in decades to power three other offshore fields from land in order to reduce carbon emissions threaten investment in the industry, the government said.

An alliance of opposition lawmakers who hold a majority in parliament said last week they would instruct the government to force Statoil ASA (STL) and its partners to power three additional North Sea fields from land as they develop Johan Sverdrup. The companies’ plan was to supply electricity from land only for Sverdrup in the initial development phase with a possible link-up to the other fields later.

Any decision on how to power the other projects should be deferred until there is “better information than what we have now,” Petroleum and Energy Minister Tord Lien said in Oslo today. Compelling companies to make the change at the outset adds to costs, threatens delays, and will discourage investment at a time the industry is already cutting back.

While it’s still studying the impact of parliament’s instruction, Statoil has warned it could delay Sverdrup, which holds as much as 2.9 billion barrels of crude, by another year from a scheduled start at the end of 2019, leading to a current-value loss of 20 billion kroner ($3.4 billion). Oil-service companies have said thousands of jobs are at stake.

The Norwegian Oil and Gas Association, which represents companies such as Statoil, Exxon Mobil Corp. (XOM) and BP Plc (BP/), said yesterday “political risk” has increased in Norway, potentially making projects less profitable for investors.

Higher Tax

The opposition’s initiative comes a year after the previous government increased taxes on oil companies, a factor cited by explorers such as Statoil and Royal Dutch Shell Plc (RDSA) to delay projects in the Barents and Norwegian Seas. It also follows warnings by the government this year to companies to avoid “unacceptable’’ postponement of projects to increase recovery at already producing fields.

The opposition parties’ move also challenges the government’s pledge to attract more companies to Norway in order to increase competition, Lien said.

Investments by oil companies in Norway will fall after a 214 billion kroner peak next year, the Norwegian Petroleum Directorate said in January forecasts. Meanwhile, Norway’s oil and gas production, western Europe’s largest, has dropped by 20 percent over the last decade.

The opposition lawmakers want to cut greenhouse gas emissions from offshore oil production, which usually uses gas turbines and accounted for more than 25 percent of Norway’s emissions in 2012. Onshore power would take a bigger share from renewable sources.

Clarify Proposal

The opposition parties now have to clarify their proposal, in which they require Statoil and partners to lay power cables to the three other fields “in connection with the startup phase” of Sverdrup, Lien said in the interview. It’s unclear whether that means Sverdrup’s first or second phase, and the final wording will determine the progress of the development, he said.

“If it’s phase two, I’d say there’s a great probability that this is completed on time,” Lien said. “If this means it should be done in phase one, that means there’s a great risk the project will be delayed, that contracts can’t be awarded next year, and there will be consequences for thousands of jobs.”

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 Alex Devine, Reed Landberg

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.