Energy at the World's End

The Wall Street Journal has posted an in-depth look at the controversy surrounding Norwegian energy company StatoilHydro’s Snoehvit project. Since 2002, the company, of which the national government owns a majority stake, has been trying to procure natural gas from the seafloor beneath the Barents Sea. Operations at Snoehvit, whose name means “snow white” in Norwegian, involve pumping natural gas from the ocean floor, liqueying it, and then transporting it for export as liquefied natural gas, primarily to the U.S. and Europe. Norway’s LNG is seen as an alternative to unstable Russian sources.

The project first began in 2002 despite strident opposition from environmentalists, who wanted the area to be protected from oil and gas companies. Yet the Norwegian Parliament (Storting) pushed ahead, approving a plan for developing the area. The project was supposed to be environmentally-conscientious thanks to its use of remote-controlled wells, which sit directly on the seabed to avoid disturbing sensitive fisheries and marine ecosystems. Unfortunately, while the ocean was not dramatically affected, Snoehvit’s operations polluted the atmosphere.

Thus, Snoehvit has been controversial for primarily two reasons:

1. Production has caused much damage to the environment. For months, as construction was under way, excess natural gas had to be burned off due to unforeseen complications brought about by the harsh Arctic conditions. Burning of natural gas is normally banned in Norway, but special accomodations were made for Snoehvit by the government. Nearby towns were consequently covered in black soot.
2. The cost has exceeded original expectations by 50% ($7.73 billion for the first phase of construction, compared to $5.24 billion).

Yet perhaps one of the underlying reasons why many Norwegians are so upset about Snoehvit is because they feel as if they have been betrayed by their government. Citizens’ trust in government has traditionally been relatively high in this small country of only four million people.

Worse yet, the betrayal involved harming the environment, which the Norwegians take very seriously, as respect for nature forms an integral part of their country’s identity. Norway’s carbon dioxide emissions, which are much higher than those in other Scandinavian countries due to its oil and gas industry and inefficient transportation sector, increased by 3 percent simply due to the burning of natural gas at Snoehvit.

The Norwegian State Church recently proposed a 5-year moratorium on new oil and gas licenses in order to protect the environment, with one of the 11 state bishops stating, “Norway also needs to show restraint. We need to demonstrate that we can use renewable energy.” This proposal was met with hostility from the labor sector, which stands to lose thousands of jobs if oil production is slowed.

Despite problems with Snoehvit, the Norwegian government, however, is still determined to develop oil and gas fields farther afield in the Arctic. When the USGS’s Circum-Arctic Survey of oil and gas resources was released in August showing that more resources lied within Danish territory (thanks to its possession of Greenland) than in Norwegian territory, newspapers were filled with worry and trepidation. Norway’s oil and gas exports account for a quarter of the country’s GDP. They have allowed the country to create the Government Pension Fund, in which it is saving hundreds of billions of dollars for the day when oil runs out (with at least $75,000 saved for each citizen), and to have the financial werewithal to avoid joining the European Union.

Thus, Arctic resources might be too tempting for the Norwegian government to turn down, even despite the environmental costs. Townspeople who oppose developments off the coast based on the acronym, “Not in my backyard,” might be less averse to developments that are out of sight and, possibly, out of mind. But at the same time, as Norwegian State Secretary Elisabeth Walaas remarked last month on behalf of Minister of Foreign Affairs Jonas Gahr Støre,

“The prospects for offshore oil and gas activities in the region are more uncertain today compared to the situation a year ago, due to the sharp drop in energy prices following the financial crisis, coupled with the development costs.”

To add another perspective on the race for energy, thousands of miles south in Yemen, Total is trying hard to get liquified natural gas out of the desert, as the New York Times reports. The company is dealing with a completely different set of obstacles in the Gulf of Aden than those facing Statoil Hydro in Arctic. Whereas ice packs, environmentalists, and the state church stand in the way of operations in the High North, in the arid deserts of Yemen, pirates, terrorism, and sweltering temperatures are the challenges of the day.

As quoted in the article, a construction manager at Total’s natural gas plant in the coastal town of Balhaf remarked on the construction of the LNG plant:

“If we can build this here, we can do it anywhere.”

And as a matter of fact, Total is trying to do the same in the Shtokman Field in the Russian territory of the Barents Sea, where it recently won a bid for a 25 percent stake in the liquified natural gas field, overcoming rivals Chevron and Conoco-Phillips. In the race for the earth’s last drops of fossil fuel, neither frozen seas nor sweltering deserts can stop Big Oil.