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INTERVIEW: Norway committed to long-term oil, gas despite climate crisis: deputy minister

Highlights

'Consensus' on oil and gas, no pause on licensing

Arctic Wisting project likely to get 2022 parliament vote

Crisis tax breaks working 'exactly' as planned

Norway, Western Europe's largest oil and gas producer, remains politically committed to supporting its petroleum industry despite rising global pressures to halt oil and gas activity due to global warming, the country's deputy energy minister, Tony Christian Tiller, has said in an interview.

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In the run-up to parliamentary polls on Sept. 13, Tiller, who serves in Conservative premier Erna Solberg's center-right coalition, acknowledged that climate change concerns were real, but said he saw a "consensus" on oil and gas in Norway and little desire to cave in to pressures seen in the UK and elsewhere to scrap the industry.

Speaking ahead of an Aug. 9 warning by the UN Intergovernmental Panel on Climate Change that said limiting global warming to 1.5 C or 2 C could soon be "beyond reach," Tiller said he expected a vote in parliament next year to approve Norway's northern-most Arctic oil project to date: Wisting.

It comes as authorities across the North Sea in the UK have put licensing on hold for environmental reasons and there is pressure to scrap the Cambo West of Shetland oil project.

For Norway, the limiting factors are the prospect of oil and gas fields depleting, and an eventual -- though still not evident -- decline in demand, Tiller said. S&P Global Platts Analytics expects Norwegian oil output, currently around 2 million b/d, to fall to under 500,000 b/d by 2040.

"In Norwegian politics there's still a consensus in the center on long-term petroleum policies. From 2030 and going forward we expect volumes particularly in oil production to come down, perhaps by as much as 50% by [mid-century]," Tiller told S&P Global Platts.

"We are preparing for a future, in the medium-term anyway, where we will see less production on the Norwegian continental shelf and that's just down to geology and the Norwegian continental shelf being a mature province."

He added that a recent uptick in approvals of new oil and gas projects had nothing to do with companies racing against the clock for fear of obsolescence, and everything to do with temporary tax breaks introduced in response to last year's price crash.

Companies wanted to "get inside the investment regime of the tax package," demonstrating it had achieved "exactly what we were hoping for," Tiller said.

He added that Norway is "fully behind" European Union emissions reduction programs such as the Green Deal, highlighting the 'Longship' Carbon Capture & Storage project, intended to sequester carbon from industrial sites around the Baltic, toward which the state is contributing $1.8 billion.

Norway also continues to protect areas of special environmental concern, including the northern Barents Sea, however, elsewhere, "we keep providing new licenses in the areas that are already opened up through these regular concession rounds every year," he said.

Asked about last year's production cuts, in which Norway restricted output for more than six months, he said they were "a unilateral decision by the Norwegian government to also protect our interests" and help stabilize markets. "We are of course totally independent of OPEC and their decisions."

Arctic project

Tiller acknowledged that a plan by state-controlled Equinor and Austria's OMV to develop the Barents Sea Wisting oil field will push new limits, describing its distance from shore as "perhaps novel." The proposed project lies further north than any previously carried out in Norwegian waters, 300 kilometers from the mainland in an area that sees little natural light for part of the year.

With resources estimated at 440 million barrels of oil equivalent, Wisting is due for approval by the end of 2022, although selection of a development concept is behind schedule.

Tiller said Wisting would probably require parliamentary approval on cost grounds, but defended Norway's record in the Barents Sea.

"The Wisting Plan for Development and Operation will likely go to parliament sometime next year," he said. "We have safely had operations in the Barents Sea for more than 40 years."

He said a ban is likely to remain on exploration in two sensitive archipelagos, Lofoten and Vesteralan, amid muted industry interest, and noted that in the Barents Sea the authorities had last year expanded a far-northern protected zone, moving the boundary of the so-called "marginal ice zone" further south.

"From a political perspective it's no secret that the whole ecosystem in the Arctic is also under pressure and climate change is happening, but it's down to a mix of scientific advice and political decisions that have led us to this decision. It has never been the policy of this government to open up new areas; I don't think it's very likely a new government will open up new areas either," Tiller said, noting any such decision would require majority support in parliament.

European role

Despite the continent's climate concerns, Tiller said he saw little sign of European appetite for Norwegian gas diminishing. "We're definitely preparing for a future with far less demand for fossil fuel, both oil and gas... But we also see that at least in the short- and medium-term we have no reason to believe -- as the market [currently] is -- that there will not be sufficient demand for Norwegian gas," he said.

"If nothing else, it's certainly a transition fuel that many European countries will rely on."

As for the North Sea region, Tiller said the aspiration was for "one big energy hub" and highlighted efforts to integrate electricity supplies, including the laying of a Norway-UK interconnector that is currently being commissioned, as well as UK renewables projects by Equinor.

But he played down suggestions Norway could send renewable power to UK oil and gas installations to help curb their operational emissions. "We are closing in on a new bilateral energy agreement after Brexit, so we are becoming more and more interdependent," Tiller said.

"On the other hand, exporting power is also becoming a hot topic in Norway. If it negatively impacts the price that consumers pay, it's not straightforward... Powering installations in the British sector would be uncharted territory politically."