Norway Lawmakers Force Statoil to Power Oil Fields From Land

May 16, 2014 11:16 am ET

(Updates with energy minister comment in 11th paragraph.)

May 16 (Bloomberg) -- Norwegian opposition parties will force Statoil ASA and other companies to power four North Sea oil fields from land, risking further delays to the country’s biggest offshore development in decades.

An alliance of opposition parties holding a majority in parliament will ask the Conservative-led government to require Statoil and its partners in the Johan Sverdrup field to include three nearby fields in a regional solution for power from land when they submit a development plan early next year, lawmakers told reporters at parliament today.

“We’re going to ask the government that the license terms for Johan Sverdrup require an area solution that covers Gina Krog, Edvard Grieg and Ivar Aasen” as well as Sverdrup, Terje Aasland, a Labor Party member of the Energy and Environment Committee, said in Oslo. “We’re certain that what we’re now seeking will not lead to a risk of delays.”

Statoil has warned against forcing electrification of the entire Utsira High area of the North Sea, saying it could cause a year’s delay to the already postponed project and current- value losses of 20 billion kroner ($3.4 billion). Aker ASA, a stakeholder in oil-services companies Kvaerner ASA and Aker Solutions ASA, said yesterday a delay could cost the industry thousands of jobs and have “dramatic consequences.”

‘Political Risk’

Statoil and its partners in Sverdrup, which could be Norway’s biggest oil find since 1974 with 2.9 billion barrels, have said the first phase of the development will use power from land without including the nearby fields.

The decision was criticized by opposition politicians who want to cut greenhouse-gas emissions from offshore petroleum production, which usually uses gas turbines and accounted for more than 25 percent of Norway’s emissions in 2012.

The opposition lawmakers stopped short of requiring that Grieg, Aasen and Krog are powered with electricity from land as soon as Sverdrup starts production at the end of 2019. Still, the Sverdrup partners will need to provide a timeline for the connection of these fields and start laying the cables linking the installations during Sverdrup’s first phase, Aasland said in an interview.

Norway’s minority government, consisting of the Conservative and Progress parties, has warned against the move, saying it would introduce “a new type of political risk” in Norway, according to Petroleum and Energy Minister Tord Lien.

Government Setback

“Parliament should avoid making a habit of changing the framework conditions for large industrial projects,” Nikolai Astrup, a Conservative Party lawmaker, said in an interview.

The opposition’s move is a setback to the government, which took office in October, relying on support from the Liberals and Christian Democrats to govern. Those two parties opposed the government on the issue of electrification of the Utsira fields.

While Norway’s government agrees with the “spirit of the proposal,” it needs to examine if it would increase the risk of Sverdrup being delayed further, Lien said in a statement. “It is essential for the government that the first phase of Sverdrup’s development proceeds according to plan.”

Statoil is looking at the proposal and needs “more time to see what consequences it will bring,” spokesman Oerjan Heradstveit said by phone from Stavanger. “It’s very important to us now to make sure that this project isn’t being delayed.”

‘Difficult Situation’

A further delay to Sverdrup would be “very unfortunate for the service industry and put several thousand jobs in danger,” Per Harald Kongelf, head of the Norway region at Aker Solutions, said in an e-mail. “We’ve already seen reduced activity in the market for maintenance and modification services on the shelf this year. A postponement of Johan Sverdrup will exacerbate an already difficult situation.”

The opposition’s initiative follows a closed hearing this week by parliament’s Committee on Energy and the Environment, where lawmakers questioned Statoil, Lundin Petroleum AB, Det Norske Oljeselskap and Lien to gather information on disparities in costs estimates for electrification.

Det Norske fell as much as 6 percent, the most since Feb. 19, and closed 4.5 percent lower at 60.15 kroner in Oslo. Statoil dropped 0.3 percent to 179.5 kroner. Lundin fell as much as 3.9 percent to 127.7 kronor, the lowest intraday level since March 26, and traded at 129 kronor as of 5:10 p.m. in Stockholm.

Norway Risking Thousands of Jobs With Sverdrup Delay, Aker Says NSN N5M6LG6JIJVR <GO> Lawmaker Pressure Builds on Statoil to Power Fields From Land NSN N5GQFR6KLVR9 <GO> Top Nordic Stories: TOP NORD <GO> Top Oil Stories: OTOP <GO> To contact the reporters on this story: Mikael Holter in Oslo at mholter2@bloomberg.net; Stephen Treloar in Oslo at streloar1@bloomberg.net To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Alastair Reed, Randall Hackley