Friday, June 08, 2012

Deal with Norway guarantees future UK gas and oil dependency

Øyvind Eriksen, executive chairman of Aker
Solutions, Norwegian Prime Minister Jens Stoltenberg and David Cameron
discussing the deal in a side street in Oslo, Norway.
Øyvind Eriksen, executive chairman of Aker Solutions, Norwegian Prime Minister Jens Stoltenberg and David Cameron discussing the deal in a side street in Oslo, Norway.

The Norwegian and British Prime Ministers yesterday agreed several landmark energy partnerships between the two countries designed to secure long-term energy supplies.

The deals will further increase UK dependence on gas and oil for decades to come, including committing it to tapping reserves in the Arctic that are opposed by environmentalists. They will also support the development of offshore wind and, it is hoped, carbon capture and storage. Finally, they continue to support a grid interconnector between the two countries, allowing the UK to import geothermal power.

The deals were sealed at a breakfast meeting in Oslo with Prime Ministers David Cameron and Jens Stoltenberg that was attended by ten leading energy companies from both countries: Fred Olsen, Gassco, Aker Solutions, National Grid, NorthConnect, Shell, Statoil, Statnett, Statkraft and Centrica.

Billions of pounds of new investment are expected to result, with the potential to create thousands of new jobs. The agreements include the creation of:
  • 300 jobs from Statoil's £12 billion investment over the lifetime of oilfields in the UK's Mariner-Bressay North Sea
  • 1300 jobs in the oil services industry created by Norwegian firm Aker Solutions in Chiswick
  • continued cooperation on gas supply and exploration between Centrica and Statoil, sealed in a new Memorandum of Understanding
  • a promise to develop the 9GW Dogger Bank offshore wind farm off the East coast of Yorkshire by the Forewind Consortium
  • a deal to provide more Norwegian gas to Shell from Gassco
  • continued progress on installing two subsea electricity interconnectors to provide geothermal electricity between the UK and Norway.
Prime Minister David Cameron said of the Norway-UK Energy Partnership for Sustainable Growth: "The jobs and investments announced today highlight how vital the strong relationship between Norway and the United Kingdom is for our energy security and economic growth. We look forward to strengthening our partnership further, driving investment into a diverse, sustainable energy mix that delivers affordable long term supplies for consumers."

Norway is already an important supplier of oil and gas to the UK, providing over a quarter of the UK's primary energy demands: 42% of imported gas and 62% of imported oil in 2011. Charles Hendry, Energy Minister, added that: “The investments and jobs announced today by British and Norwegian companies are a clear signal of the benefits of this partnership.”

The agreement says that oil exploration on the Norwegian and the UK continental shelves “will continue to provide substantial energy supplies for the coming decades". Included in this is the ability to use new technology to improve recovery from mature fields and from the Arctic.

Carbon capture and storage

The statement continues: "The UK is currently developing a gas generation strategy, setting out the role for gas-fired power in delivering a secure and affordable route to a low-carbon economy. CCS will enable gas to provide substantial electricity consistent with our climate change agenda."

Norway is leading the world in this technology; it has been burying carbon dioxide there since 1996. Last month, Norway's Prime Minister, Jens Stoltenberg, opened the next stage of the world's largest prototype carbon capture and storage plant at an oil refinery and gas power plant at Mongstad, that is financed by the Norwegian government to the tune of $1bn.

The United Kingdom, however, like the rest of Europe, is lagging behind Norway and other countries such as America, Canada and Australia, all famous for the size of their carbon footprints in implementing CCS. The main reason is the low price fetched for a tonne of carbon released into the atmosphere under the European Emissions Trading Scheme, roughly one tenth of the cost of burying it back in the ground.

David Cameron hopes that we can learn a thing or two about CCS from the Norwegians to improve the prospects of the fledgling CCS projects here in the UK.

However, with the proposed emission limits of 450gCO2/kWh for Emissions Performance Certificates for new gas-fired power stations in the new Energy White Paper, it is hard to see that there will be any regulatory incentive to capture carbon from these power stations.

Arctic oil and gas

Because of the agreement, Britain will have no shortage of oil and gas in the years to come. Norway is ranked 13th amongst nations with gas reserves. Major new discoveries of oil and gas have been made recently in the Norwegian Continental Shelf, in the Skrugard and Havis fields in the Barents Sea, and the Johan Sverdrup in the North Sea. Aker Solutions has recently been awarded contracts by Statoil for exploring these. The Barents in particular is a harsh, Arctic environment.

But exploration in the Arctic faces severe opposition from environmentalists. Greenpeace calls it “a catastrophe waiting to happen" and is mounting a big campaign, fronted by Jarvis Cocker, who recently visited the Arctic Circle and was reportedly moved to tears at the region's majestic landscape.

David Cameron did not have time to do any sightseeing. In the joint statement is the claim that coming Electricity Market Reform will create a "framework for investment in the UK" worth "over £200bn in energy project opportunities. Similarly," it continues, “Norwegian policies are creating new commercial opportunities for companies, particularly in the High North," a reference to the Barents Sea discoveries. "The Norwegian-Swedish Green Certificate Scheme also offers incentives for British investors in renewable energy," it adds.

This scheme was launched on 1 January 2012 and is a market-based system to support the expansion of electricity production from renewable energy sources and peat. Since then 12,573 green certificates have been issued in Norway in relation to 26 plants.

In Norway, Statoil, which is 67% owned by the Norwegian government, is facing stiff opposition from the public, church leaders and 28 Norwegian organisations including WWF Norway and Greenpeace Norway, for having chosen to get involved with tar sands.

Wind farms

As for the renewable energy projects, the largest of these is the Dogger Bank one, which comprises up to four offshore wind farm projects, 156km off the coast of Teesside, which could provide over 10% of the UK's energy needs

The windfarms will be connected by onshore high voltage direct current (HVDC) underground cabling and up to four direct current (DC) to alternating current (AC) converter stations. A local consultation is currently underway.

The Forewind consortium managing the project is comprised of the Norwegian companies Statkraft and Statoil, German company RWE npower renewables, and Scottish company SSE.

Finally, the Norwegian-UK agreement says that "The UK and Norway will work together to build on outcomes of the Rio+20 Conference, including further development of the Energy+ Initiative to increase clean energy access for developing countries."

The next step is a conference to discuss the achievements and future priorities of the UK-Norway energy partnership, to be held at London’s Royal Geographical Society in September.

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