Norwegian oil activities at a turning point

The next two years will be exciting ones for the Norwegian oil and gas industry. The challenges are many, and there is great uncertainty. Some of the main questions are: Will new major oil and gas discoveries be made on the Norwegian continental shelf? Can the Norwegian oil and gas industry sustain and develop the expertise it possesses without new, commercially viable discoveries being made and without the development of new fields approved? Will the Norwegian oil companies and the Norwegian supplier industry be internationally competitive without new and challenging contracts on the Norwegian continental shelf?

The Norwegian continental shelf needs to be competitive vis-à-vis foreign oil companies. The experience that the major oil companies can bring to Norway are crucial for the continuation of the Norwegian oil industry and oil R&D, though the foreign oil companies operating on the shelf are just as Norwegian with regard to staffing as Statoil and Hydro.

Campos Basin

The supplier industry is well on its way to being able to make use internationally of the experiences it has on the Norwegian continental shelf. The once bitter rivals Aker Maritime and Kværner Olje og Gass have merged into a single company. Norway finally has an industry player of sufficient weight to obtain large contracts abroad. And the merger has already borne fruit: two contacts for Petrobras for developing the deepwater fields in the Campos Basin. Both Marlim Sul and Roncador will be equipped with production platforms based on the design of Snorre B. The tragic accident with P-36 in spring 2001 clearly showed that converting old drilling rigs to production platforms is not the way to go. The risk is too high.

Other segments of the Norwegian supplier industry are also very active abroad, especially in Brazil and Angola. Deepwater deposits there will make good use of the expertise that can be transferred from the large subsea fields that have been developed in the North Sea. The experience from the Norwegian continental shelf with its strict environmental standards and severe weather conditions is important for developing fields in many places in the world.

Kyoto's challenges

In the past two years exploration activities on the Norwegian continental shelf have been low, with discovery rates even lower. Nearly all the new deposits can be connected to existing infrastructure, either via long horizontal wells or with subsea installations and the reconstruction of existing platforms. A big market for modification work is therefore emerging. The oil companies' goal is to keep their installations going as long as possible, in order to be able to empty smaller reservoirs and because the degree of extraction is constantly increasing. This presents the oil companies with major environmental challenges. More energy is required to extract the last drops of oil than the first ones. In addition, the volume of produced water increases considerably, potentially threatening the marine environment.

Norway is one of the first industrialised countries to ratify the Kyoto Protocol. This means reduced emissions of greenhouse gases. Twenty-five percent of all CO 2 emissions in Norway come from oil activities on the continental shelf. And this figure does not include all the safety vessels, supply vessels and shuttle tankers. Since many of the Norwegian oil fields have passed plateau production, there is a growing need for more energy to maintain the pressure both in the reservoirs and for the transport of gas to the Continent. This worries the oil industry, because high special carbon taxes may result in the resources on the Norwegian continental shelf not being exploited as well as they should be.

Hydroelectric power

So far one oil field receives power from the electricity grid in Norway, namely Troll Gass. Experiences have been very positive. Several oil companies are looking at the possibility of electrifying their facilities at sea. Most likely to do so are BP and Phillips Petroleum, which are considering laying a high-voltage cable out to the Valhall field, supplying Ekofisk, Valhall and Gyda with electricity from land. Although this can be costly, considering the fact that both Ekofisk and Valhall will both be in operation until long after 2030, the oil companies will save large sums in carbon taxes. At the same time, BP has its own target of reducing its greenhouse emissions by 15 percent per year. That is why supplying power from land can be a good alternative for these fields in the southern part of the Norwegian continental shelf.

The Bellona Foundation, a Norwegian environmental organisation, also applauds such an idea. They see great advantages in concentrating the supply of power to oil installations at sea. The optimal operation of large power plants is far better than the operations we see today on the Norwegian continental shelf.

CO 2 mitigation

For the electric utilities, supplying power from land is a challenge. Norway has already reached the limit of what traditional sources of electric power can supply. Consumption is growing steadily, and in ten years it is forecast that Scandinavia, a common electricity market, will be short 40 TWh. The gap between already approved capacity and what will be needed must be met either by large gas-fired plants or through import of electricity. However, political goals call for renewable energy sources and not for polluting gas-fired power plants.

In the autumn the Norwegian government will present a Report to the Storting on the use of gas in Norway. It will contain clear signals regarding research efforts on gas-fired power plants with CO 2 mitigation, i.e. pollution-abatement technology to sequester CO 2 from the other waste gas and deposit the CO 2 gas in aquifers on the continental shelf, as well as how much is to be committed to developing hydrogen technology and fuel cells. Norwegian research centres and the oil companies look forward with great suspense to seeing what pressure the Norwegian government will bring to bear to develop and adopt new and greener technology for electric power generation.

Today Norway has a very green electricity supply. Almost 100 percent is covered by hydroelectric power. Only on the coldest winter days is there a need to import electricity from Denmark's coal-fired power plants. However, this demand is growing each year. The increased electricity needs on oil installations places the Norwegian government in a dilemma, because increased extraction means an increased use of energy, energy that emits greenhouse gases, which the government itself has pledged to reduce.

New alternative non-polluting energy sources are crucial for further growth. Unlike other countries where gas-fired power plants pollute less than the older coal-fired plants they replace, introducing gas-fired plants in Norway means increased emissions.

There are clear signals that a rather large research centre is to be set up devoted to attaining a greener conversion of natural gas to electrical energy. The indications are that such a centre will be set up in Herøya in Porsgrunn Municipality. There are many reasons for this, but chief among them is that this area today is the country's leading resource centre for industrial technology development. Here it is possible to find the necessary market for gas and waste from gas production.

In such a scenario it is therefore wholly appropriate that the primary topic of this year's ONS conference is energy for the future. This is a major dilemma in Norwegian politics. Although Norway needs more energy, it has no infrastructure for using gas for supplying energy. There is great political opposition to building gas-fired power plants, at the same time as Norway is the world's second-biggest exporter of energy in the form of oil and gas.

This is a paradox - one of the world's most energy-rich countries is short of power, in the form of electric energy as well as in the form of political will to implement the necessary measures to ensure the country's own energy supply. It is easier to solve other people's problems than one's own.

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