Green Party pushes Norway oil phaseout as its political influence grows

By Nerijus Adomaitis

OSLO, Sept 9 (Reuters) - In Norway, made rich by oil and gas, the idea of shutting fields sends chills, but that is exactly what the small Green Party is pushing as a global switch away from fossil fuels looms.

And it's a demand with greater meaning after Monday's election, with the ruling Labour Party needing the support of the Greens - who more than doubled the seats they hold to seven - to safeguard a two-seat majority secured by left-leaning parties.

"We will definitely prioritise putting the climate issue at the forefront," Green Party leader Arild Hermstad told Reuters.

"We have to do a transition from the fossil fuel era over to the renewable sector. And that's what Norway is lacking today."

The party is demanding an immediate stop to exploration and a phaseout of petroleum activities by 2040, and is even naming the fields it wants shut first - the Statfjord, Brage, Draugen and Ula fields, followed by eight more by 2030.

The country's newly reelected Prime Minister Jonas Gahr Stoere said on Tuesday Norway should continue to explore for oil and gas, indicating tough negotiations ahead.

For now, Norway's oil and gas industry is booming, with record investments and exports. But workers at supplier companies that account for almost half the sector's headcount face growing risks of layoffs as major projects wrap up and new orders remain scarce beyond 2028.

Five years ago, with the world beset by the COVID-19 pandemic, the government provided more than $10 billion in tax relief and other support measures to the oil and gas sector, as well as more modest funding to assist green energy development.

But that funding has failed to deliver a hoped-for "bridge" to green projects anywhere near as large as oil and gas, where most of the remaining undeveloped discoveries are small and will not be able to replace current order books or production.

"The anticipation was that this (tax package) would be a bridge to another industry," oil and gas producer Aker BP CEO Karl Johnny Hersvik told Reuters. "Now I'm a bit concerned... If these yards run out of work, they'll struggle to survive that gap."

Norway's top-ranked energy services firm, Aker Solutions, earlier this year cut its renewables-linked revenue guidance, citing sector immaturity.

The company said it was currently busy across most of its locations, but like other companies in the sector was dependent on more projects materializing in future. "(We) cannot rule out future capacity adjustments," it said.

Worley Rosenberg, a shipyard in Stavanger that focuses on the petroleum sector, has announced it will lay off 30% of its workforce, around 300 people, due to dwindling orders.

"It was a shock," union representative Aleksander Eriksen told Reuters. "We have one new offshore wind contract, but it's not coming soon. We'll face challenges in the next one to two years."

Aibel, a services company in the energy sector which employs some 3,900 people in Norway, is one firm finding alternative work, constructing floating converter stations for UK and German wind farms alongside oil and gas platforms at its shipyard in Haugesund on Norway's west coast.

OUTPUT FALL-OFF

But the scenarios for oil and gas output in Norway all point in one direction, and that is lower.

The Norwegian Offshore Directorate's base-case scenario sees a 40% drop in output by 2040, and possibly 70%.

"We won't be able to sustain the current production plateau much longer," NOD Director General Torgeir Stordal told Reuters.

That's a worry for a sector that accounts for about 50% of Norway's export revenue and some 10% of its private sector jobs.

Aker BP's AKRBP.OL 700 million barrel of oil equivalent Yggdrasil oil and gas field, due to start in 2027, is the last of its size.

Equinor's EQNR.OL near 500 million BOE oilfield Wisting was postponed in 2022 due to rising costs. Beyond these, the future lies in smaller developments.

The Norwegian government's push for more exploration in the Barents Sea, believed to hold most of the country's undiscovered resources, have failed to trigger a wave of interest, so far.

Only Equinor, Aker BP, and Eni's ENI.MI Var Energi are drilling exploration wells in the region, out of more than 15 companies operating licenses on the Norwegian Continental Shelf.

"If we really want big discoveries, we should look in areas that haven't been exploited," said Aker BP's Hersvik.

Declining petroleum output in Norway will increase Europe's dependence on liquefied natural gas and oil imports from the U.S. and the Middle East.

However, European Union rules set to effectively end petrol-engined auto production by 2035 are also set to reduce the demand for fossil fuels.

In addition, all sectors – including heavy industries – facing a binding target to reduce emissions by 90% by 2040 versus 1990 levels.

SLOW DEVELOPMENT

As for the jobs at risk, part of the problem in finding new work for the sector is slow green energy development in Norway.

The government has pledged 30 gigawatts in offshore wind capacity by 2040, but has awarded just 1.5 GW so far. A long-awaited tender for another 1.5-2 GW of floating offshore wind was launched in May.

Billionaire Kjell Inge Roekke in a May letter to shareholders of his investment firm Aker AKER.OL, which controls Aker Solutions, said there had been "little progress" in the sector.

"Norwegian offshore wind, as a meaningful energy source, is at least a decade away - at best," he added.