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MarketScreener Homepage  >  Equities  >  Oslo Bors  >  Kværner ASA    KVAER   NO0010605371


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Norway ramps up Western Europe's largest oilfield as oil's future questioned

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12/05/2019 | 11:19am EST
FILE PHOTO: A supply vessel is seen at the Equinor's Johan Sverdrup oilfield platform in the North Sea

JOHAN SVERDRUP OILFIELD, North Sea (Reuters) - Norwegian oil worker Nils Magne Lunde is preparing to drill a well at Johan Sverdrup, a North Sea offshore field which started in October and has quickly become Western Europe's biggest oil producer with rapidly rising output.

Lunde views the prospects of his industry with caution.

"I might retire in this industry, but I would not recommend it to my son, who is 15," he said, watching the waves crash against the pipes pumping crude from a reservoir 1.9 kilometres (1.2 miles) below the seabed.

Doubts about the future of Norway's main industry are mounting. Norway has not discovered any major new oil deposits and green groups and young politicians are increasingly calling for production to be curbed or even a shut down due to climate change.

But Equinor, Norway's state-controlled oil company and Sverdrup's operator, proudly states how oil will play a critical role in its future, even as global leaders debate how to stop the global warming caused by fossil fuels.

"Some people are saying we should stop producing oil altogether, for the sake of the climate. But we believe Johan Sverdrup is a prime example of exactly why we shouldn't do that," the company said.

The oilfield has an estimated 50 year life span, and drew 83 billion Norwegian crowns (£7.06 billion) of investment in phase 1 development. Phase 2 will require 41 billion Norwegian crowns ($4.48 billion) -- hardly figures that suggest an industry on its last legs.

"World energy demand continues to rise, and we will still have a significant need for oil and gas in the foreseeable future," Equinor said.

"But not all barrels are created equal," it adds.

Johan Sverdrup shows how technology can help extract oil more cleanly and why "Norwegian oil and gas are important in a climate perspective," the company said.

Sverdrup gets all electricity via an 160-km undersea power cable connecting it Norway's hydropower dams. In that way, the field's carbon emissions are reduced to 0.67 kg per barrel compared with the industry's average of 18 kg.

Nonetheless, Norway, which meets some 2% of global oil demand and is Europe's second-largest gas supplier after Russia, is trying to boost its renewable production.

Equinor aims to use about 15-20% of its capital spending on renewable energy projects by 2030, focusing on offshore wind.

Its current projects include 3,600-megawatt (MW) offshore wind farm Dogger Bank in Britain and the 800-MW Empire Wind farm off New York.

"It is capital, technology and competence generated from oil and gas that enables us to excel in offshore wind," Equinor's Chief Executive Elder Saetre told a conference in November.

"Without Johan Sverdrup, there would be no Dogger Bank."

Environmentalists, however, give short shrift to that argument, common within the oil industry.

"[The] Johan Sverdrup startup means that there will be more oil and gas to be burned, and we cannot afford that because of climate change. The world needs to reduce emissions to zero by 2050, and Equinor developing new fields simply doesn't add up to that," said Frode Pleym, head of Greenpeace Norway.

Swedish teen activist Greta Thunberg refused to accept a prize from the Nordic Council, a body of Nordic governments, partly because of Norway's backing for Johan Sverdrup.


Equinor's suppliers in Norway are also increasingly catering to the renewables industry. Dusavik port owner NorSea Group wants to build a logistics chain to supply onshore and offshore wind power worldwide, predicting huge growth.

"We as a company take responsibility to contribute to the green shift, while at the same time we need to look for business opportunities, and to combine both in a good manner," said Knut Magne Johannessen, a senior advisor at NorSea Group.

"That exercise is going on in the entire oil and gas industry in Norway."

Norway's Kvaerner, which build Sverdrup, has won Equinor's $1.5 billion crowns contract to supply concrete hulls for offshore wind power turbines. Although green campaigners and many younger people would like Norway to phase out oil production and stop exploration in the fragile Arctic, the country is not about to abandon the industry which has made it one of the world's richest states. The sector employs 139,500 people in a population of 5.4 million and produces 17% of GDP. Oil and gas sales from the Norwegian continental shelf account for about a fifth of state revenues and 40% of exports.

"We think that the world needs oil and gas, in combination with renewables, for many decades to come," said Arne Sigve Nylund, Equinor's head of Norwegian production.

(Editing by Alexandra Hudson)

By Nerijus Adomaitis

Stocks mentioned in the article
ChangeLast1st jan.
AKER BP ASA 0.69% 293.1 Delayed Quote.1.15%
EQUINOR ASA 0.47% 181.3 Delayed Quote.2.93%
KVÆRNER ASA 0.46% 10.9 Delayed Quote.-2.43%
LONDON BRENT OIL 0.37% 64.88 Delayed Quote.-2.39%
LUNDIN PETROLEUM -0.25% 324.3 Delayed Quote.2.07%
NORDIC GROUP LIMITED -3.03% 0.32 End-of-day quote.10.34%
REPSOL 0.32% 14.145 End-of-day quote.1.54%
SSE PLC 0.58% 1486.5 Delayed Quote.2.75%
TOTAL -0.02% 48.795 Real-time Quote.-0.83%
US DOLLAR / RUSSIAN ROUBLE (USD/RUB) -0.25% 61.437 Delayed Quote.-0.91%
WTI 0.17% 58.7 Delayed Quote.-5.35%
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