Norwegian Minister of Petroleum & Energy, Einar Steensnæs

Einar Steensnæs is committed to please the oil companies in future licensing rounds, after the disappointing participation in the 17the licensing round and the high number of dry wells drilled during 2002. Steensnæs is therefore trying to find ways to sweeten the prospect of continued exploration on the Norwegian Continental Shelf (NCS). Finishing the report on the consequences of exploration and production in the Lofoten and Barents region is now high on the agenda.

‘At least the largest oil company participated,’ the Norwegian Minister of Oil and Energy, Einar Steensnæs, says with a smile. But he is quick to get serious again when talking about the latest licensing round on the NCS. EssoMobil, Norsk Hydro, Agip, DNO, DONG, OER Oil, Paladin, RWE-DEA and Statoil applied for licenses, while neither Shell, BP, ConocoPhillips or any of the other the big oil companies took the effort of applying for the blocks on offer.

Steensnæs has been given a hard time following the energy crisis in Norway this winter, as well as for Snøhvit contracts going to Spain instead for of to struggling Norwegian yards. Now he is eager to make friends within the industry.

Report Ready by Next Round
‘Of course we took the 17th licensing round as a strong signal,’ Steensnæs says.
‘We understand that it might be difficult to convince headquarters that they should continue to focus their exploration on the NCS when a lot of virtually virgin areas are tempting elsewhere,’ he says.

‘But we are committed to meet the expectations of the oil companies in future,’ Steensnæs underlines. ‘We are working hard to be able to put together blocks that will be attractive to major foreign oil companies as well as to Statoil and Norsk Hydro.’

‘One important factor is the report we are awaiting, about the consequences on the environment and for the fishing industry of exploration in Northern areas. This report is due to be ready in the autumn 2003.’ Steensnæs confirms that means the content of the report might be available to the ministry before the next licensing round.

‘At the moment we cannot be 100 percent certain about the dates, but it is a possibility. It would be a great advantage to have this report, and then move forward with new licenses on a basis that secures both the environment and the oil and gas industry.’

Steensnæs is not worried that by hurrying the work on the report he might be seen as pushing it through too fast in order to please the oil industry.

‘My decision to go through with this report before granting further exploration licenses in sensitive areas has given me respect among environmentalists. But some of the environmentalists are blocking any kind of oil and gas production in sensitive areas at all, and that is too radical. They have put up a red light, the oil & gas industry have put up a green light, while I have been holding a yellow light.’

Continuing the Ministers metaphors, one might soon see the lights turning green in the Ministry’s office. ‘It is certainly time to meet the expectations of the industry,’ Steensnæs says.

‘We can see the industry is struggling on several fronts.’ 2002 turned out to be frustrating with regard to exploration, with high expectations being substituted with dry wells. Steensnæs mentions Presidenten, Havsule and Solsikke, as examples of serious disappointments for the industry.

‘This frustration influences my thinking ahead of the 18th licensing round,’ the Minister underlines. But he also points out that the main importance regarding the up-coming report is that it is thorough, and that its conclusions are well substantiated.

Mutual Disappointment
‘We are well aware that the NCS is facing tough competition from many new petroleum areas in the world,’ Steensnæs says.

‘At the same time we are trying to find ways that will continue to make Norway a strong competitor when the supermajors discuss where their exploration money will perform best.’

The dry wells have done nothing to strengthen that situation. While the oil industry at times has expressed disappointment towards the Ministry of Oil and Energy, seeing the Minister as too lenient with regard to the environmentalists, there are traces of disappointment also going the other way.

But hopes are still high. Steensnæs is satisfied with both Statoil and Norsk Hydro entering in the 17th licensing round. And he is also pleased that EssoMobil entered the game again, after abstaining one round.

‘We have also received clear messages from companies like BP and Shell that they have no plans of abandoning exploration on the NCS,’ Steensnæs maintains. They are waiting for the Minister’s next offer, and this time he is determined to please.

Energy Crisis
Steensnæs has had a troublesome winter so far, with the energy crisis brought on by lack of water supply within the reservoirs of the hydro energy plants. In a country so overwhelmingly dependant on electricity from hydro energy plants this led to considerable price increases and even talk of rationalizing. However, it has not brought Norway closer to gas powered energy plants.

‘We have all the time been willing to fund research for a gas powered energy plants with no CO2 emissions. This work continues, and at the moment we are considering a pilot project at either Tjeldbergodden or Kårstø, developed by Statoil,’ Steensnæs says. But the budget for research on CO2-free technology was recently cut, by Parliament, from NOK 50 million to between NOK 30-40 million.

‘I don’t believe that cut-back to have great impact on the overall work towards finding CO2-emission free technology,’ the Minister says.

‘This is long-term work. I hope we will see a pilot project as soon as possible. We are ready to fund a plant in 2006, but many people within the industry believe that will be to early to expect the technology to be ready in terms of setting up a fully operational power plant,’ he adds.

So Norwegians will have to continue to import power while exporting gas for at least another five years to come, probably more. Throughout the years the Nordic Energy Market has been operational Norway has had net import of energy.

During the heated discussions following the energy crisis this winter, a progressive tax on energy was proposed. The same proposition has been presented to Parliament twice earlier, by Labour governments, but has been turned down both times.

‘I will certainly look into this question seriously, but I believe history has shown us it is not very good energy policy,’ Steensnæs says. When Norway had progressive tax on energy it was by many seen as very bureaucratic. ‘But the situation is somewhat changed, and I will give it careful consideration,’ Steensnæs promises.