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Greens set for bigger government influence post election

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Party demands phaseout of petroleum activities by 2040

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Oil and gas accounts for 50% of Norway's export revenue

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 ( AKRBF ) 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 ( AKRBF ) 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 ) 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 ( EQNR ), Aker BP ( AKRBF ), and Eni's 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 ( AKRBF ) 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 ( AKAAF ), 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.