Watching The World: Norwegians debate oil hunt

April 26, 2010
Controversy continues in Norway over oil and gas exploration off the Lofoten and Vesteralen islands.

Controversy continues in Norway over oil and gas exploration off the Lofoten and Vesteralen islands. The debate heated up last week after the government released a new report on potential reserves in the region.

In the report, compiled by the Norwegian Petroleum Directorate, the Norwegian government cut about a third off its earlier oil and gas resource estimate for the waters off the Lofoten and Vesteralen islands.

NPD, a government agency tasked with developing the country's offshore oil and gas reserves, said the waters around the Arctic islands could hold as much as 1.3 billion boe.

That estimate, based on recent seismic surveys, compares unfavorably to an earlier one that put reserves at 2 billion bbl, and the lower amount is thought to bolster opponents of drilling in the Arctic region.

Worth it?

"The amount of oil in Lofoten and Vesteralen indicated…means that we would only prolong Norway's oil era by a year or half a year," said Rasmus Hansson, secretary general of the World Wildlife Fund in Norway. He then asked: "Is it really worth it?"

Norway's Minister of the Environment Erik Solheim seemed very cool to the idea of drilling in the region, saying that even the possible existence of large oil and gas resources off Lofoten and Vesteralen will not be of decisive importance.

NPD also said the expected future net value of oil and gas resources in the Lofoten area was 500 billion Norwegian crowns ($85.79 billion), based on a price of one barrel of oil at $80 in the short-term, rising to $97 in 2030.

According to Solheim, though, even the value of the resources is only one of several factors that will be considered before the government gives the green light to start exploration in the north. That decision, by the way, is due late this year.

Meanwhile, Norway's Minister of Energy and Oil Terje Riis-Johansen took something of a diplomatic position, saying, "We will use the next 6 months to assess the reports and examine these questions."

Robust response

The most robust response came from Norway's state-owned Statoil, which said it disagreed with NPD's new reserves estimate.

"We have different geological assessments," said Hege Marie Norheim, assistant director of Statoil and its chief lobbyist for the development in the Lofoten region. "I do not think we in the industry are going to change our estimates much," Norheim said.

Still, others in the debate saw a silver lining in the report.

Gro Braekken, head of the Norwegian Oil Industry Association, said NPD's report was "very promising" and that: "There are possibly big quantities of oil and gas in that area." In Braekken's estimate, "There will be [an] opening for exploration in the end."

Much remains to be discussed, and we doubtlessly have not heard the last from Norway just yet.

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