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Last Updated: Wednesday, 14 April, 2004, 06:43 GMT 07:43 UK
Norway prepares for dry North Sea
By Lars Bevanger
In Oslo, Norway

Hydro helicopter at sea
Norway wants to head further north in its search for oil

Norway's once vast oil reserves in the North Sea are dwindling, and the government is facing tough choices when planning for the country's economic future.

Since oil was discovered on the Norwegian continental shelf in 1971, this small nation has been propelled into the world's third largest oil and gas exporter, and petroleum activities contribute 20% of the gross domestic product (GDP).

But now forecasts suggest the country's economic mainstay has started its inevitable decline.

The oil and energy minister, Einar Stensnaes, told BBC News Online it was time to start looking at the alternatives.

"Not only is it essential to look for other energy sources. It is also important to look for other industrial activities to develop alongside the petroleum activity," he said.

Estimates say one third of the total petroleum resources on the Norwegian continental shelf are still unexploited.

The government works on the assumption there are another 50 years left of oil there.

It is not sure, however, that all the resources are exploitable.

New areas, bigger challenges

Norway's biggest potential finds are no longer in the North Sea, where oil companies are well established and have very good resources and knowledge of how to get the oil and gas to the surface.

Hydro executive vice president Tore Torvund
Hydro executive Torvund is searching for alternatives to oil
"The undeveloped areas in the [far north Arctic] Barents Sea are very promising, but more challenging in many ways," said the director general of the Norwegian Petroleum Directorate, Gunnar Berge.

His directorate has advised the government that it must expand the search for oil and gas to the Barents Sea, and late last year the government announced it would allow drilling for oil and gas there.

This provoked fierce criticism from environmental organisations which argued the fragile nature of the Arctic would not withstand any potential oil leaks.

Many here say the oil and energy minister has been caught between a rock and a hard place on this question.

"We must secure new acreage, and the most promising areas are in the far north," said Mr Stensnaes.

"But this also coincides with the very important fishing areas in Norway, and the population in this area is heavily dependent on fishing."

Drilling in the Arctic is extremely expensive and difficult because of the often fierce weather conditions.

And there is also a significant political dilemma still to be resolved.

Both Norway and Russia are laying claims to an area of the Barents Sea that is bigger than the North Sea and is thought to contain even more oil and gas.

Gas on the up

While Norway's oil production seems to have started its inevitable decline, gas production is on the increase.

Norway's petroleum production is not critical to cover its energy needs
Statoil is Norway's largest oil and gas producing company.

Acting chief executive, Erling Oeverland, told BBC News Online the company believes there is enough gas for another 100 years of profitable production.

"In five years time, we will be producing as much gas as oil from the Norwegian continental shelf," he said.

"After that, gas will be bigger than oil."

Norway is already the third largest exporter of gas to the rest of Europe.

Alternatives

The production of oil and gas is not critical to cover the energy needs of Norway itself.

Exploration submarine
A third of Norway's petroleum resources remain unexploited
Most of this country's 4,5 million people are largely served by cheap hydro electric energy.

But it is a great worry that the industry most crucial to this country's wealth is terminal.

One company looking into future energy alternatives is Hydro, Norway's second largest oil and gas producer.

"We're presently making a small scale research project a small Norwegian island where we take the wind, transform it into electricity and then transform that electricity into hydrogen," said executive vice president Tore Torvund.

"When there is no wind, we can produce electricity based on hydrogen."

Mr Torvund does not foresee making any profits from alternative energy sources for the next twenty to thirty years.

By then this country's economic mainstay - oil -may well be fast running out.





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