Producers in western Europe’s biggest oil and gas exporter must brace themselves for a new legislative age that will disrupt the status quo, according to Norway’s Green Party.
After entering parliament last year, the Greens are now seeing evidence that lawmaking affecting the energy industry is changing to allow greater debate around processes that until now have been taken for granted. The oil lobby says that allowing the political debate to delay decision making will hurt Norway’s biggest export industry.
“People have gotten used to not having government interference in oil projects in Norway,” Rasmus Hansson, who fills the one seat the Greens won last year, said in an interview. “Now the bigger parties see an acute need of getting out of a position of being totally attached to the oil business.”
Parliament’s latest move forcing producers to rely on a more costly form of energy to power their operations is a case in point. Instead of using on-site power, parliament last week pushed companies to rely on so-called electrification, requiring them to build electric cables to the mainland for key new oilfield developments.
The Greens say its accession to parliament in 2013 is already influencing larger opposition groups like Labor to pay more attention to the offshore industry’s environmental impact.
It’s time for Norway to “accept that climate consequences need to be factored in during an early phase,” Hansson said.
Labor and the rest of the opposition last week reached an accord with the minority government to require Statoil ASA and other oil companies to power three fields in the North Sea’s Utsira High area from land by 2022. Though the final accord was a softer version of parliament’s original plan, it marked a break from lawmakers pattern thus far of not questioning processes inside the energy industry.
Both Labor, which relies on backing from oil industry unions, and the ruling Conservatives say that the last week’s interference in the early planning process was extraordinary.
Still, at the Norwegian Oil and Gas Association, which represents firms such as Statoil, Royal Dutch Shell Plc and Exxon Mobil Corp., there is now concern that the new legislative approach will create industry doubts that disrupt their ability to plan and budget accurately.
Statoil shares fell 0.9 percent to 182.9 kroner as of 11:51 a.m. in Oslo. Norway’s government owns a 67 percent stake in the Stavanger-based company.
“An uncertainty has been created that Norwegian politicians may change the framework on short notice,” Erling Kvadsheim, the lobby’s environment and policy director, said by phone. “The industry will account for that in its investment forecasts,” risking project delays and cancellations at a time where oil companies are already reining in spending, he said.
Offshore installations are typically powered by gas turbines on site and oil and gas platforms contribute more than 25 percent of Norway’s total emissions. By tapping power from land, Norway can use its abundant and clean hydropower.
The Greens are trying to halt development in the Barents Sea, where companies such as Statoil and Lundin Petroleum AB are exploring to make up for dwindling North Sea output. The sea is among areas where companies risk wasting money on uneconomic projects, according to a Carbon Tracker Initiative report released this month.
Wasting $1.1 Trillion
The report shows that the high cost potential of oil production in the Barents Sea, along with deep-water and tar-sands projects, would need market prices of at least $95 a barrel to break even. Brent crude was at about $110 on yesterday.
“We have reached the peak of wealth and jobs from an oil economy and now there is a political moment where Norway can start launching a socio-political project to find the next industry,” said Hansson, a biologist and environmental activist. “We need to look toward renewable energy.”
Oil explorers risk wasting $1.1 trillion of investors’ cash through 2025 on these projects, even as the total amount of oil the world can afford to burn without warming the planet to unsafe levels is available from less costly deposits at $75 a barrel, the study said.
The Greens are also planning a proposal that would make it mandatory to conduct a climate-impact assessment prior to opening new offshore acreage, Hansson said.
Parliament’s electrification demands will be “very expensive,” and the industry should be trusted to weigh such measures’ climate benefits against costs, the Norwegian Oil and Gas Association’s Kvadsheim said. Still, the lobby expects focus on the climate and the environment in policies affecting the oil and gas industry to grow.
“That trend is here to stay,” Kvadsheim said.