Will Barents oil investments be financial disaster?

Investment risk or profitable industry? Arctic oil and gas drilling was topic at Sunday's opening debate in Tromsø at the Arctic Frontiers conference. (Thomas Nilsen/Barents Observer)
Investment risk or profitable industry? Arctic oil and gas drilling was topic at Sunday’s opening debate in Tromsø at the Arctic Frontiers conference. (Thomas Nilsen/Barents Observer)
TROMSØ: To drill or not to drill, that’s the Arctic Frontiers question of the year. Investor Jens-Ulltveit-Moe warns Troms and Finnmark against state investments in White Elephants.

“Investing in infrastructure to facilitate for fossil fuel exploration in the Barents Sea will double your trouble,” said industrialist and investor Jens Ulltveit-Moe during the armchair discussion opening this year’s Arctic Frontiers conference.

He points to the fact that investments will not only be a waste of money as no large-scale oil extraction will come, but it will also take focus away from other infrastructure investments that would be more needed.

Norway is soon to announce new licenses in the Barents Sea. Meanwhile, tumbling oil price scares investors from entering the Arctic shelf.

“Those licenses will be licenses to losing money,” argues Ulltveit-Moe and continues:

“It is obvious that nobody will start now. We have seen it with the Shtokman field; it’s there; it’s huge, but it’s not economical profitable. The Castberg field has a breaking price of $80 per barrel. … With production start in the late 2020’s, breaking price will be $120 per barrel, that is three times today’s level.”

Jens Ulltveit-Moe painted a dark future for drilling in northern waters, pointing to a European Union that will reduce its demand for natural gas, a China that takes climate issues more and more serious and a world were oil consuming cars will drastically be replaced by electric or hydrogen powered vehicles over the next few decades.

White elephant

“If some companies will enter the Arctic, go ahead, but for Norway as a nation it will be a financial disaster. State investments for infrastructure in the north aimed at oil and gas activities in the Barents Sea will be like investing in a white elephant. The infrastructure will not be needed.”

The term “white elephant” means investments considered without any use or value.

“You should be a very optimistic if going into that business,” Ulltveit-Moe argued in front of a fully packed auditorium at the Fram Centre in Tromsø Sunday evening. Arctic climate and energy will be on the top of the agenda for the 1,400 participants at Arctic Frontiers, likely the most important event for anyone interested in climate and business on the top of the world in 2015.

Royal support for renewable energy

Among the participants in Sunday’s armchair discussion was Albert II, Prince of Monaco. He has for years branded environmental protection in the Arctic. The prince argued that a mix is needed in the future’s energy market.

“We need a mix, including hydrocarbons, but we need as much renewables as possible,” said the Prince of Monaco.

Nina Jensen, head of WWF-Norway said oil from underneath the Arctic seabed should remain where it is.

“The Arctic is currently literally melting under our feet. We will probably be the first generation to experience an ice-free Arctic Ocean,” she said.

“We are the last generation that can do something about it,” Nina Jensen argued and encouraged for investments into renewable energy sources.

That is exactly what Jens Ulltveit-Moe has done. From owning some 40 oil tankers and oil related services, his investments are today into renewable energy.

“Barents gas is part of the solution”

Kjell Giæver, director of Petro Arctic countered the negative picture painted by Ulltveit-Moe and Jensen in the debate.

“The world needs oil. If looking at Europe, the Barents Sea and the Arctic is the only place to find new resources. It is the oil that has created modern Norway,” Giæver said arguing that Norway is world leading in both carbon-capture technology and electrification of offshore oil installations.

“Breaking price for production depends on the size and the fields locations. Some fields might have a cost as low as $50 per barrel,” said Kjell Giæver.

He also argued that natural gas will be an important part of the solution as the world will have to move away from coal to reduce emissions of climate gasses.

Related stories from around the North:

Canada:  Canada ponders exceptions to relief well rule for Arctic oil drilling, Alaska Dispatch

Finland: Solar and wind power yield cheapest energy say Finnish experts, Yle News

Greenland: Arctic oil and gas must stay in ground to restrict warming to 2°C says study, Blog by Mia Bennett, Cryopolitics

Iceland:  From Arctic Circle 2013-2014, a big drop in the price of oil, Blog by Mia Bennett

Norway:  Currency drama has little impact on tourism in Barents region, Barents Observer

Russia: New Russian oil fields along Barents ice edge, Barents Observer

Sweden: Lower electricity bills for Swedes, Radio Sweden

United States:  Oil prices expected to stay low through 2016, Alaska Dispatch News



Thomas Nilsen, The Independent Barents Observer

For more news from the Barents region visit The Independent Barents Observer.

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