Eni’s Norway Troubles Risk Fueling Fight Against Arctic Oilby
Barents Sea’s Goliat field idle again after series of mishaps
Setbacks make industry rhetoric on region ‘hollow’: Greenpeace
A series of mishaps at the world’s northernmost producing oil field shows Norway’s plan to boost its flagging production by tapping the Arctic Ocean may not be so easy.
Goliat, Eni SpA’s flagship project in the Barents Sea, suffered a power outage two weeks ago that forced its halt, the latest in about a dozen incidents since the field began output in March following a costly two-year delay. They include gas leaks and a serious accident involving a worker in June.
“The whole project has been a scandal from day one,” Owe Ingemann Waltherzoee, a secretary at Norway’s SAFE union, said by phone. “These are vulnerable areas. We need good projects that can serve as examples and I’d hoped Goliat would be such a project. But unfortunately they haven’t delivered.”
Eni’s setbacks threaten to intensify opposition to drilling in the Barents Sea, where Goliat is the first production platform, just as Norway seeks to expand exploration in the remote Arctic waters. Oil companies in the Nordic country, where production has shrunk by half since 2000 as North Sea fields decline, are keen to demonstrate that operating in the Barents is safe and profitable even as crude’s collapse erodes revenue.
“It’s not unusual to face challenges in a startup phase,” said Andreas Wulff, a spokesman for Eni Norway, adding “this is unrelated to the specific operational conditions in the Barents Sea.” Energy Ministry spokesman Harald Vengen echoed those comments, saying “it usually takes some time before new industrial facilities have stable operations.”
Yet the industry watchdog, the Petroleum Safety Authority, believes the incidents at Goliat are more serious than in most startup phases, Director-General Anne Myhrvold said Tuesday.
Two unions in June signed a letter expressing concern that safety at Goliat was insufficient, just 12 days before a worker was injured by a wire rope.
Goliat’s setbacks “probably illustrate that it’s more difficult to operate there than in the south” of Norway, said Ole Gunnar Austvik, a professor at the Oslo-based BI Norwegian Business School. “It’s remote, it’s cold, it’s expensive -- it costs more for the same than in the south. So the projects are more vulnerable.”
Eni must guarantee safe operations before resuming production, Labor Minister Anniken Hauglie said Tuesday.
Eni’s Wulff said the field will remain shut until the company submits its investigation into the incident to the regulator and discusses its findings, no sooner than the end of this week.
The producer’s continued trouble at Goliat comes as other companies, led by Norwegian state giant Statoil ASA and Sweden’s Lundin Petroleum AB, seek to develop new finds in the region and push further east in the Barents Sea after exploration licenses were awarded earlier this year.
Those efforts are unlikely to be affected by Goliat’s problems, which are project-specific, according to Teodor Sveen Nilsen, an analyst at Swedbank AB. “I’d be surprised if Statoil let itself be scared from this,” he said.
Statoil declined to comment on Wednesday.
The Norwegian company said earlier this year it reduced the break-even price at its Johan Castberg field in the Barents Sea to less than $45 a barrel from more than $80. Eni said at the time that Goliat would break even at less than $50, while Oslo-based consultant Rystad Energy AS estimated that it needs a price as high as $100. Brent crude is currently trading below $49 a barrel.
Drilling in the Arctic has long been contentious in Norway. Opposition parties on both sides of the political spectrum, allied with environmental groups, have objected to the opening of blocks close to the polar ice cap, and have successfully blocked exploration off the Arctic Lofoten archipelago -- an area that Statoil says is key if Norway wants to maintain production beyond 2025.
Environmental groups and others, including religious organizations, plan a demonstration Thursday afternoon outside Norway’s parliament in Oslo to demand the Arctic be kept off limits to oil companies.
“The fact that Eni has failed so thoroughly at Goliat is making the rhetoric about the Arctic being simple more hollow every day,” said Truls Gulowsen, head of Greenpeace’s Norwegian unit. “It’s bolstering the fight for the protection of Lofoten. It shows that even the most modern installations offer no guarantees.”