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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

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This $65 Billion Oil Opportunity Will Never Be Tapped

Norway

Western Europe’s biggest oil and gas producer, Norway, is also one of the countries that is most self-congratulatory on its climate action, electric cars sales, and green policies. One of the central—and most controversial—issues in the campaign leading up to a general election next month is whether Norway’s scenic Lofoten archipelago should remain off-limits for oil exploration and development.

Estimates have put the potential oil resources underneath the picturesque islands at between 1.3 billion and 3 billion barrels of oil equivalent, estimated to be worth US$60-65 billion at today’s oil prices.

The two biggest parties in Norway—the Conservative Party currently in power in a coalition government and the opposition Labor Party—are favoring initial steps to start an environmental impact assessment for the Lofoten area. However, both parties need coalitions with smaller parties to form a government after the September election. And all the potential junior partners of both Labor and Conservative are strongly opposed to any meddling with the beauty of the Lofoten, Vesterålen, and Senja islands.

Recent polls show that the currently ruling minority coalition of Conservatives with right-wing Progress Party and two smaller support parties would win 80 seats in Parliament, while Labor and the parties that support it would win at least 87 seats.

Whoever wins next month’s election, they are unlikely to lift the ban on oil exploration next to the archipelago, so the oil companies that have been eyeing new exploration areas vital for Norway’s industry, jobs, and oil production, may never see their dream come true.

The Norwegian Petroleum Directorate (NPD) has estimated that the areas off Lofoten, Vesterålen, and Senja could hold petroleum resources equal to around 1.3 billion barrels. That’s about US$60 billion at current oil prices, FT says. Local industry group Konkraft has estimated that those resources could be even bigger, upwards of 3 billion barrels, which, if more is crude oil rather than gas, means at least US$65 billion in oil revenues, according to Bloomberg estimates. Related: How Much Fuel Does It Take To Get To The Moon?

Norway’s government has seen its oil and gas revenues slump following the oil price crash of 2014. Last year, government revenues plunged by more than 40 percent compared to 2015, due to lower oil and gas prices.

Norway’s oil major Statoil, in which the government holds a stake, argues: “We also see that a significant drop in production and activity will occur after 2025. If we are to retain a high level of activity after 2025, access to new exploration areas will be crucial to the future of the Norwegian continental shelf. The 23rd licensing round with the announcement of new blocks is therefore very important, as are the impact assessments of new areas outside of Lofoten, Vesterålen and Senja.”

Earlier this year, the government said it was offering a total of 102 blocks up for exploration in the 24th licensing round on the Norwegian Continental Shelf in the Norwegian and Barents Seas—a record number of blocks in the area—despite environmentalists’ concern over drilling in the Arctic.

Environmentalists continue to protest drilling in the Arctic and the potential opening of the Lofoten islands to exploration.

“We are ready to smash the oil-industry’s wet Lofoten dreams,” Ingrid Skjoldvær, head of Nature and Youth (Natur og Ungdom) has told The Independent Barents Observer.

Greenpeace is also joining the protests, and is suing Norway in a trial set to begin in November. Greenpeace said it would argue “that granting licenses to open a new oil frontier breaches the Norwegian Constitutional right to a healthy and safe environment for current and future generations and contravenes the Paris Agreement.”

WWF Norway is calling for a permanent ban on oil and gas drilling in Lofoten, Vesterålen, and Senja, to replace the temporary ban that has been in place since 2001. Related: Natural Gas Prices Poised To Rise As Exports Boom

The ban, even if temporary, is unlikely to be lifted, regardless of who wins next month’s election.

According to estimates of the Konkraft oil industry alliance, it takes an average of 18 years from the award of a production license on the Norwegian Continental Shelf until a field begins production. If the discovery is large, the timing could be shortened to 10-15 years, Konkraft said in a report last year, in which it argued that “To slow this decline in output and revenues, the oil companies need access to new and attractive exploration acreage.”

In 18 years’ time, however, Lofoten oil may never be needed, because depending on climate policies and energy transitions, we may be past peak oil demand in 2035-2040.

By Tsvetana Paraskova for Oilprice.com

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