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The electrification of Norwegian oil platforms will cost NOK 50 billion. The consequence could be increased emissions, says oil veteran Hogne Hongset.
Most politicians and environmental organizations were quick to praise when Equinor unveiled plans in January to electrify a series of oil rigs.
But an oil and energy veteran is blowing holes in the history of the oil giant and environmental organizations.
– There is only one reason this has succeeded, and that is because the energy industry wants higher electricity prices. This is just a crazy waste of money without any climate effect, Hogne Hongset tells Nettavisen.
He has worked for more than 20 years in the oil industry and has been a special advisor to the LO Industri Energi union for ten years.
After he wrote a post in Aftenposten with ramsalt criticism of the electrification plans, the debate stalled.
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– No climatic effect
In every year, the platforms on the shelf have been powered by gas turbines that burn gas. This leads to CO2 emissions. By electrifying the platforms, electricity will be drawn from the terrestrial power grid, which in Norway is almost exclusively hydroelectric. The goal is therefore for Norwegian oil production to be the cleanest in the world.
But what hasn’t emerged so clearly is that emissions are only being transferred to other countries, Hongset believes.
– This gas will thus be replaced by clean electricity from the ground. But the released gas will eventually be marketed and shipped to other countries, which burn the gas. In other words, at best there will be zero climate effect, Hongset tells Nettavisen.
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The oil sector is subject to the EU quota system, which means that they have to pay to emit CO2. If Norwegian oil rigs don’t pay to burn the gas, someone else in Europe will.
An illustration from Equinor of how electrification will work.
Photo: Equinor
– Politicians are bombarded by so-called professional councils, but on closer inspection it doesn’t hold up. Electrification will reduce Norway’s emissions, but will not have a global climate effect, says Hongset.
If gas ended up in sectors not covered by the EU quota system, climate accounts would not even be neutral. Electrification will lead to increased climate emissions.
Researcher Asbjørn Torvanger also supports Hongset’s view.
– The emissions will be exactly the same. It does not influence European emissions. The fact that a gas turbine is electrified or built does not affect European emissions, said Asbjørn Torvanger of the Cicero Center for Climate Research in Klassekampen.
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NOK 20,000 per household
According to Equinor, the cost of electrifying parts of the rack will be approximately NOK 50 billion. Due to the tax system for the oil and gas sector in Norway, the costs will largely end up with Norwegian households.
The oil industry will be able to enter the expenditures as investments, and therefore the income from the oil sector in the state budget will be reduced accordingly. In practice, it means less for politicians to spend on public services like schools, health and other welfare plans.
The article continues after the measurement.
Increase in the price of electricity
Hongset believes that it is quite clear that the climate argument in favor of electrification is used only as a cover, and that it is actually the energy industry that wants electrification. – Not least, the wind power industry is anxious, because electrification will drive up electricity prices and improve the profitability of new wind power plants.
Today, Norwegian households use approximately 16 TWh. The electrification proposed by Equinor will use 10-12 TWh. According to Energi magazine, the electricity bill for Norwegian households will increase by up to NOK 1,200 per year for an average household.
One of the main competitive advantages that Norway has had when meeting the rest of Europe is low electricity prices. Among other things, these electricity prices mean that Norway has a number of large industrial companies that use huge amounts of electricity.
– Most Norwegians can afford an extra one hundred crowns in electricity bills each month. But major industrial companies in Mosjøen, Sunndalsøra, Sauda and many other places will feel the consequences. The cost of energy represents up to 40 percent of your expenses. The electrification project could lead to a major decline in Norwegian industrial companies, Hongset says. He is surprised that his former employer Industri Energi is not stronger in the field in the case.
According to estimates by the Norwegian Directorate of Energy and Water Resources (NVE), an industrial company in the northern part of Norway could receive up to NOK 60 million in higher electricity costs.
If industrial companies point to countries where a lot of fossil energy is used, such as Russia or China, climate emissions could rise a lot.
– If an aluminum producer moves the factory from Norway, where it uses hydroelectric power, to China or the Middle East and uses coal, then the climate emissions for every ton of aluminum will be eight times higher, says Hongset.
The energy industry earns a lot
The big winner if oil rigs are electrified will be the energy industry. Since electricity consumption will rise so sharply, the price of electricity is likely to rise as well.
– Many of Norway’s industrial companies are owned by foreign capital. They don’t look at the red numbers for more than a year or two before considering moving. Therefore, we risk a significant long-term wave of weakness. It will cost Norway many critical undertakings in local communities across the country, Hongset says.
He believes that much of the reason this part of the electrification debate has not emerged is because the connections are so complicated.
– For me, it is crazy that we spend 50 billion crowns, mainly from Norwegian households, on measures that do not reduce climate emissions, but which can result in industrial death and higher electricity prices for all, he says.
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Another winner in the calculation is the oil industry. Because most of the investment costs to electrify the Norwegian continental shelf will be sent to taxpayers through the system, it will mean big savings for Equinor, which will no longer have to buy climate fees.
According to Europower Energi magazine, the oil industry will reduce its emissions by 3.2 million tonnes per year in Norway through planned electrification. This means approximately NOK 2.2 billion in reduced fee expenses per year.
Hongset is supported by climate policy spokesman Jon Georg Dale (Frp). He believes that electrification is not a problem if it is profitable. But that’s certainly not the case here, you think.
– I am afraid that electrification projects will have only one consequence: that we spend a huge amount of money on electrifying the platform to get the result that the gas is transported ashore, also to Germany or elsewhere, and burned there, he says Hit Nettavisen.
Dale himself is from an industrial settlement in western Norway and is seriously concerned about rising electricity prices, which he believes has been one of Norway’s main competitive advantages.
– We ended up with climate politics characterized by symbols instead of things that work, he says.
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– Must cut as much as possible
Equinor spokesman Morten Eek rejects the criticism and believes that electrification is absolutely necessary to reduce CO2 emissions as much as possible.
– The oil and gas related industry accounts for about ten percent of global greenhouse gas emissions, and more than 80 percent of the emissions we have on rigs today come from gas turbines. Then we will make CO2 off the shelf, this is where it really matters, Eek writes in an email to Nettavisen.
MUST CUT: Equinor press contact Morten Eek believes it is absolutely necessary to reduce emissions on the Norwegian shelf, and believes it can replace coal in Europe.
Photo: Øyvind Hagen (Statoil)
Equinor believes that the gas that is not burned on Norwegian platforms will therefore be sent to a European market where the energy mix still largely consists of coal. Therefore, the gas will help to replace the coal.
– The gas that pushes the coal produces important reductions of CO2. Gas used in a power plant will be much more energy efficient if burned here than in a turbine on the shelf.
– Is it justifiable to spend NOK 50 billion if it is not clear whether it will contribute to reducing emissions globally?
– We believe that the ambitions we have put forward, including electrification, can generate great value for the licenses we operate and for society, while significantly reducing emissions. Until 2030, the fields and facilities we operate in Norway will have the potential to provide direct revenue to the state of more than NOK 3 billion.
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– Not very logical
Hongset rejects Eek’s argument that the released gas removes energy from coal in Europe.
– First of all, nobody knows what other production will be eliminated by this gas. And if Norwegian hydropower can wipe out coal power in Germany, what kind of logic is it to spend 50 billion going down the road to electrify the platform and then send released gas to Germany, he says, adding:
– We already have a large excess capacity in the electricity grid outside the country, and this will increase significantly when we have a new submarine cable in operation to Germany by the end of the year. That cable only has a capacity for as much power as Equinor will use in the base. Letting power go directly to Germany will not generate a single penny in new investment. Morten Eek’s argument here, I’m sorry to say, is not very logical. And that’s the nice way to put it, Hongset concludes.
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