In 1958, the Norwegian Geological Society wrote a letter to the Ministry of Foreign Affairs. It stated: “Do not expect to find coal, oil or sulphur on the Norwegian Continental Shelf.” Then, on the night before Christmas Eve of 1969, drilling rig Ocean Viking struck oil in an exploration well offshore Norway for Phillips Petroleum, the 32nd one and that rig’s last well for that area.
||“If Norway has a lucky number, I would have to say it is 32,” said Per Terje Vold, outgoing Norwegian Oil Industry Association (OLF) President, in his speech marking the 40th anniversary of the association.
The discovery became decisive for the development of the Ekofisk field and the basis for the prosperous Norwegian economy it is today. The oil industry accounts for one third of the state’s income, 250,000 workplaces, and NOK 7,000 billion in value since 1969.
“That chief geologist was later fired,” said Per Terje Vold, outgoing Norwegian Oil Industry Association (OLF) President, in an interview with Norway Exports just weeks before his retirement.
Vold will step down on January 1, 2010 after six years heading the lobby group on behalf of its 105 oil company and oil service company members. He will be replaced by Gro Brækken, an oil veteran from Statoil and Norske Shell and current secretary general for Save the Children Norway.
He leaves during a challenging time for the oil industry: a global financial crisis, volatile spikes in the oil price, falls in the number of commercial finds on the Norwegian Continental Shelf, dwindling production, and calls from environmentalists for the oil industry to curb its activities.
He has worked in the oil industry nearly his entire professional life, starting in the 1970s as a civil servant in Norway’s Ministry of Industry working on oil matters before there even was a Ministry of Oil. Since then, he has worked in Ministry of Oil, Statoil, and headed the Federation of Norwegian Process Industries (now known as the Federation of Norwegian Industries).
Over those 40 years, he has seen many milestones since that fateful discovery in 1969.
In the 1970s, the Norwegians worried if they could cross the 300 metre-long trough running north-south along the shelf with a pipeline to the Continent. In 1977, gas started flowing from the Ekofisk field to Emden, Germany.
In the 1980s, Norwegian companies built a 500 metre tall concrete platform and towed it through the fjord to the Troll field. It broke the Guinness Book of World Records then for the heaviest man made mobile object ever made at a weight of 656,000 tonnes.
Then in the 1990s, Norway made the last great discovery on the shelf, Ormen Lange, in great sea depths of up to 1,100 metres. The industry came up with new subsea technology to develop the field, which has successfully been producing gas since 2007. “The total technology development over the past 40 years is what I am really proud of,” said Vold. “We are used to being gold medallists in winter sports…but we are not used to being world leading when we talk about oil and gas.”
Norway at a Crossroads
Now, the industry is at a crossroads again. There have been small discoveries only for the past 15 years. Even though gas production is expected to rise, the total petroleum output will fall because of declines in oil production over the next ten years.
One of the main challenges going forward is the environmental opposition to opening the promising areas offshore Lofoten and Vesterålen to exploration. In order to keep Norwegian technologycompetitive abroad, the industry will need to have access to new acreage at home to maintain its technological competence.
“We don’t have plenty of time,” said Vold. “We are in a hurry.”
The Ministry of Environment is working on a management plan for the areas offshore Lofoten and Vesterålen that will be submitted to Parliament possibly by next year. After that, the ministry will prepare an environmental impact study that will be debated before drilling can commence in the region.
The area off Lofoten and Vesterålen is highly regarded as the most promising unexplored region offshore Norway with estimated reserves of about 3.4 billion barrels of oil equivalents. At the current oil price, that represents more than NOK 1.5 trillion kroner, half the value of the Norwegian Government Pension Fund.
Vold believes the new Petroleum White Paper to be presented to Parliament in the spring of 2010 should put the total petroleum activity in a more holistic perspective and show the importance of a Lofoten oil development. This is the first Petroleum White Paper for the newly elected government under Jens Stoltenberg, which did not present a WhitePaper during its previous four-year term. In the past 20 years, there has been one on average every second year.
“This White Paper will show the activity on the shelf, facts about activities, impact on the mainland and value creation,” said Vold. “The management plan (for Lofoten and Vesterålen) does not give the holistic picture.”
The day before Christmas Eve 1969, drilling rig Ocean Viking struck oil in block 2/4 offshore Norway for Phillips Petroleum in the 32nd well and the rig’s last well in the block.
The OLF will be fighting to open other areas in addition to Lofoten and Vesterålen. There are currently discussions surrounding whether to continue awarding acreage in mature areas through Awards in Predefined Areas (APA) rounds in between regular concession rounds.
There is also a recent focus on the area around the island Jan Mayen, a Norwegian territory in the Arctic Ocean. Vold recently visited the volcanic island with the oil minister and other representatives to discuss the possibilities for opening up the area to exploration. However, the lack of recent seismic data and the island’s remoteness pose a challenge.
Another potential new frontier is the Barents North region, which lies north of the Barents Sea South blocks currently being exploited. The Barents Sea has produced 3 million standard cubic metres (scm) of oil equivalents in 2008 and is estimated to contain 1,030 million scm in undiscovered resources, according to the Norwegian Petroleum Directorate.
“The earlier we start, the better it is,” said Vold.