Norway challenges EU on state support to Barents oil infrastructure

Norway's Minister on Petroleum and Energy Tord Lien.

Oil companies reluctant to invest in the Barents Sea due to low oil price get surprise aid from Petroleum and Energy Minister Tord Lien.


“We will start negotiations with ESA to see how state support can be provided to pipes and maybe also an onshore terminal for the oil,” the Norwegian Petroleum Minister said during a speech at Barentshavkonferansen in Hammerfest this week.

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“We must see what manoeuvring room we have to bring the oil onshore,” Tord Lien said to laud applause from the audience. Hammerfest is the new capital for oil and gas development in the Norwegian part of the Barents Sea.

ESA is the European Free Trade Association (EFTA) surveillance authority. Norway is not a member of the European Union, but is via its membership in the European Economic Area (EEA) given equal conditions of competition and equal rights to participate in EU’s internal market.

State support to any industry is regulated in special agreements and cannot automatically be given to for instance the energy sector. 
The tax relief given to Statoil’s Snøhvit LNG factory in Hammerfest in 2001 is one example of a state supported project that was challenged by ESA.

Tord Lien has Statoil’s Johan Castberg field in mind when now initiating talks with European competition authorities. Development of the field, located 100 kilometres north of Snøhvit gas field is put on hold after oil prices last year dropped dramatically.

“Unfortunately, the exploration campaign has proven less new oil resources in the Castberg area than expected. In total, we have not proven enough resources in Castberg to make the field viable for supporting infrastructure, including a pipeline to shore and an onshore terminal on its own,” Arne Sigve Nylund, Statoil’s executive vice president for Development and Production said last year.

The Johan Castberg field could hold up to 600 million barrels of oil equivalents.

By giving economic support to build both the pipeline from the field to a terminal on Norway’s Barents Sea coast, the minister hopes for both a more positive development plan from Statoil as well as providing jobs onshore. 

A planned oil terminal at Veidnes near the North Cape is expected to create 30 new jobs and thrice as many through spin-o effects, BarentsObserver reported in 2013.