Taking the Environmental Option at Johan Sverdrup May Put Thousands of Jobs at Risk

Johan Sverdrup Development, rendering: Statoil

Mikael Holter

May 15 (Bloomberg) — Norwegian lawmakers pressuring oil companies to power North Sea fields from land in an attempt to cut greenhouse-gas emissions risk thousands of jobs by delaying the country’s biggest offshore project in years, Aker ASA said.

Suppliers including Kvaerner ASA, which builds parts for offshore platforms, would suffer if parliament instructs state- controlled Statoil ASA and the other partners in the Johan Sverdrup field to review development plans to include power from land to neigboring installations, Aker Chief Executive Officer Oeyvind Eriksen said. Aker, controlled by billionaire Kjell Inge Roekke, has a stake in Kvaerner.

“If you put a delay of Johan Sverdrup on top of the weaker market and the contracts that were lost about a year ago, that could have dramatic consequences,” Eriksen said in an interview in Oslo today. “Thousands of jobs are at stake.”

Opposition politicians have increased pressure on Statoil and partners Lundin Petroleum AB and Det Norske Oljeselskap ASA to change their plans for Sverdrup, possibly the biggest oil discovery offshore Norway in almost 40 years. They’ve proposed that the companies build a more expensive cable network to also power three nearby fields. The proposal is due to be considered next month.

Such a move would delay the start of production at Sverdrup, which has already been postponed, by a year until 2020 and lead to a current-value loss of 20 billion kroner ($3.4 billion), Statoil has said.

‘Unfortunate Intervention’

Norway’s minority Conservative-led government criticised the proposal, saying it would hurt Norwegian suppliers competing for contracts on a project that will cost as much as 120 billion kroner in its first phase alone.

“A delay of Johan Sverdrup should be avoided to secure employment and the further development of the supplier industry in Norway,” Aker’s Eriksen said. A move by parliament that results in more delays would be a “very unfortunate intervention,” he said.

The oil-service industry is already facing a slowdown in spending as companies including Statoil and Royal Dutch Shell Plc scale back investment plans to boost returns amid rising costs. Yards in Norway last year lost out to Asian companies on several Norwegian offshore contracts, and more efforts are needed to keep Kvaerner’s Verdal site “afloat,” Eriksen said.

Sverdrup work will be crucial and a delay would have “significant, adverse effects on Kvaerner,” he said. “No international project can change that reality.”

‘Right Balance’

Aker Solutions ASA, an oil-services group also controlled by Aker and which was awarded a 650 million-krone front-end engineering design contract for Sverdrup, would also be hit by a delay, though at a later stage, Eriksen said.

Statoil’s plan to power only Sverdrup with electricity from land in its first phase, while maintaining the possibility of tying in the three other fields later on, strikes the right balance between industrial interests and protecting the environment, Eriksen said.

Offshore fields are typically powered by less environmentally friendly gas turbines that are installed on platforms. Norway’s Environment Agency earlier this year said that “powerful and quick” cuts are needed to meet a 2020 goal of reducing emissions by 30 percent from 1990 levels, two-thirds of which must come domestically.

Aker owns half of Det Norske, which has stakes in two of the three licenses holding Sverdrup. Aker said earlier today that the oil producer aims to have a plan to fund its share of the field’s development by the end of this year. That could include the sale of new shares, Aker said.

Copyright 2014 Bloomberg.