Oil Companies Still Eye Controversial Norwegian Acreage

OSLO (Dow Jones Newswires), Jan. 11, 2012

Statoil, ExxonMobil and Shell are among seven oil companies that have paid NOK54 million each to buy seismic data from the Norwegian Petroleum Directorate, enabling them to map the resources of controversial, but promising areas outside of Lofoten, Vesteraalen and Senja in northern Norway.

The Lofoten area could contain petroleum, but production would happen in an important area for fisheries and close to vulnerable coastal areas.

The Petroleum Directorate is the only entity allowed to gather seismic data from these areas, as they are not yet opened for oil and gas exploration.

Other companies that have bought the seismic data are RWE DEA, GDF Suez, Dong Energy and Det Norske Oljeselskap, providing the directorate with NOK378 million in revenues, almost covering the entire NOK420 million cost of gathering the data.

Lofoten is a symbolic issue for environmentalists. So far, they have had their way. The area is closed for oil business at least until after the next election in 2013, in an agreement between the Socialist party, SV, and its two government partners.

But oil companies are still interested. Statoil could hope for a solid oil discovery "of several hundred million barrels" in the areas outside of Lofoten, said Kent Hoegseth, Statoil's Vice President, Exploration for Access, adding that Norwegian petroleum production will halve from 2020 to 2030 if companies do not increase discoveries.

To stabilize the current falling Norwegian petroleum production, a discovery the size of recent Aldous/Avaldsnes would be needed every other year, he said. Aldous/Avaldsnes is one of the largest discoveries ever on the Norwegian continental shelf, estimated at 1.7 billion to 3.3 billion barrels.

One reason the oil industry is interested in the Lofoten acreage is its promising geology, raising expectations that it "could contain oil instead of gas," according to Knut Noerve at the Norwegian analyst firm Rystad Energy. Oil is more valuable and easier to market than gas, he adds.

The Petroleum Directorate is pleased that so many have bought its seismic data. "Now the oil companies can make their own interpretations," said spokeswoman Eldbjoerg Vaage Melberg.

In 2010, the directorate estimated the resources in 50 prospects in the Lofoten area at about 1.3 billion barrels of oil equivalent.

Statoil's Hoegseth says the opening of the blocks Nordland VI and VII outside of Lofoten and of the central Barents Sea towards Russia can provide new provinces that "can make a difference" for future production.

Without that, "we will see a severe downturn in the oil sector after 2020", he says.

The oil industry is "desperate," says Lars Haltbrekken, leader of Friends of the Earth Norway, who doesn't believe the oil sector needs access to "the most vulnerable areas along the Norwegian coast" after making three significant oil discoveries in one year.

Lofoten, Vesteraalen and Senja are important fishing areas and the world's largest spawning ground for cod, said Haltbrekken, so an accident there would have "big consequences."

In 2010, Norway's total petroleum production was about 1.45 billion barrels. The Lofoten potential of about 1.3 billion barrels would equal less than one year of total production.

Even if Norway opened the Lofoten are for drilling, "production would eventually fall," Haltbrekken said, adding that Norway should start reducing its dependence on fossil energy resources "sooner rather than later."

Copyright (c) 2012 Dow Jones & Company, Inc.


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