Eivind Reiten: "Political constancy critical for the Norwegian shelf"

November 7, 2002, 00:00 CET

"We have great opportunities for further growth on the Norwegian shelf, but they require that the government gives us a dependable political framework to operate in. And there's no time to lose," said President and CEO Eivind Reiten at Hydro's annual energy seminar in Bergen on Thursday.

In his speech, Reiten stressed how political will and a strong determination to act are vital if petroleum activity on the Norwegian continental shelf is not to simply wither away over the next 50 years:

"The era of major discoveries is no more. In recent years discoveries have been fewer and smaller. In addition, recent exploration results reveal a disappointing trend with a success rate of just 14 percent. It is in fact the case that no oil has been produced from licenses allocated in Norway after 1986. This is the reality we now have to face up to," said Reiten to the roughly 200 representatives from the industry, the government authorities and the media.

Steensnæs: sustainability is the key

Petroleum and energy minister Einar Steensnæs pointed out that the basis for the government's continued oil and gas policy is one of co-existence:

"Fossil energy sources will be dominant for a long time ahead. The challenge is to produce and use them in the most enironmentally way possible. The Norwegian shelf plays a leading role environmentally, but there's still room for improvement. This is the fundamental condition for the continued development of the shelf," he stated.

Steensnæs' point of view sums up the government's licensing policy, which aims to allocate new exploration acreage to an extent and schedule that promotes the stable and cost-efficient discovery, development and production of new resources.

Petroleum-free zones?

In connection with the announcement of the 17th licensing round on the Norwegian shelf, more stringent environmental requirements were set for areas considered to be especially vulnerable, environmentally speaking. In addition, impact assessment studies were initiated for petroleum recovery in the Barents Sea and in the area off the Lofoten Islands.

"This impact study will give us a better basis for assessing continued operations in an area that is environmentally sensitive. Zero discharges form a basic requirement here. Moreover, we shall consider establishing petroleum-free zones if it appears impossible to achieve co-existence between petroleum and fishery activities," added Steensnæs.

The government's impact study will form the basis of an overall plan. This will again draw up the contours for considering petroleum-free zones.

"If everything goes according to plan, the report will be completed in 2005. It might take longer, but it might even be completed earlier than expected," he summed up.

"Concerned about the time taken"

Reiten left no doubt that petroleum-free zones will make it considerably more difficult to achieve the government's goal of continued growth on the Norwegian shelf up to 2050, as laid down in white paper no. 38:

"I accept that the authorities need to look in to this, but I am concerned about the time taken. It can lead to the petroleum industry being the victim of a lack of political constancy. It is imperative that the authorities realize that it takes many years, from the time a field is allocated, until it can start producing. Nevertheless, there is no intention of our moving into areas before we are sure that we can co-exist with society's other important industries and interests," he stated.

A long-term development scenario for the Norwegian shelf was recently launched, as one of two possible future trends, by the government. It reveals a trend on the shelf that might provide additional wealth creation of roughly NOK 2,000 billion between now and 2050. Reiten pointed out that it will be difficult to fulfill this trend, if prospective areas are closed for the exploration and production of oil and gas reserves.

"If society decides to go down this route, it will be difficult to achieve the long-term development scenario. We have great opportunities for continued growth by adopting measures to avoid a dramatic fall in production. A good example of this is the amended tax regime on the UK shelf in the mid-1980s, which led to much greater exploration activity and the development of smaller fields," said Reiten.