Norway and U.K. planning energy industry curbs

The governments of Norway and the U.K. are planning to tinker further with their energy industries, but for differing reasons.

Marit Arnstad, Norway's minister of petroleum and energy, announced at the Offshore Northern Seas conference in Stavanger late last month a review of the government-led offshore industry cost-cutting initiative.

Earlier this year, Arnstad put 12 approved offshore developments on hold, in a bid to help the government keep Norway's booming economy from overheating.

Now Arnstad feels the freeze has not curtailed costs in the offshore oil and gas sector as planned. She said that a committee had been appointed to work out why project costs are rocketing, with a brief to disclose its findings by yearend.

"During the last year," said Arnstad, "we have seen that the oil companies' plans show a significant increase in investments as compared with earlier estimates.

"The increase is partly due to additional investments in some projects (and) partly due to timing effects, as some investments will be realized earlier than expected, and, last but not least, due to increased costs because of the pressure in general on capacity in the industry.

"I am concerned about the consequences of such tendencies both on the competitive position of the continental shelf and on the state petroleum revenues. The industry is competing for limited resources, a fact that influences the development of the whole industry."

U.K. gas plan

John Battle, U.K. energy minister, justified forthcoming changes to British energy policy, which he said was flawed, necessitating the current review of power generation.

"From an environmental standpoint," said Battle, "one can applaud the advent of cleaner and more modern technology; but it seems plain daft to close down perfectly good coal stations for something more expensive."

The previous U.K. government encouraged the development of a massive amount of new gas-fired power schemes, even when the new plant was sometimes more expensive to run than the coal plant it displaced.

"Beyond that," said Battle, "there are deeper and longer-term implications for our security of supply. The loss of its major market was threatening to close down much of the U.K. coal industry before very long, which could effectively shut off indigenous coal as an energy option for us, because of the great cost of reopening mines once closed.

"The report from the gas consultants to the review suggested that, under the old power station consent arrangements, gas could rise to 60% of fuel used for electricity generation by 2010 and to more than 75% by 2020. At the same time, we could be importing a third of our gas supplies by 2010 and up to 90% by 2020.

"That may not of itself present an immediately obvious security problem, but it all increases uncertainty, which is why we needed to take an informed and considered view about this fundamental and significant shift within the electricity sector."

No contradiction?

Battle claimed that the government's support for coal in preference to gas does not, as would seem obvious, contradict pledges to reduce emissions of carbon dioxide and other airborne pollutants.

"We believe our proposals to be consistent with achieving our international obligations on greenhouse gases and on sulfur emissions," said Battle.

"While our proposals may slow the rate of decline in coal use in the electricity sector, it will decline-and CO₂ emissions likewise-as a result of the gas generation already consented to but not yet on stream.

"We will be going out to public consultation in the autumn about the options for meeting our climate change targets, but it does not make sense to expect to achieve them from the electricity sector alone."

Battle also announced the approval by the U.K. Department of Trade and Industry of the revised plan for disposal of the Brent spar. Earlier this year, operator Shell U.K. Exploration & Production proposed taking the derelict loading buoy onshore for dismantling in Norway, instead of the original controversial plan to dump it at sea.