A summary of KonKraft report 7 Economic consequences of petroleum activities
Even with a very high level of activity on the NCS, Norway s supplies industry exported goods and services worth almost NOK 100 billion in 2008.
3 Economic consequences of petroleum activities The oil and gas business is highly significant for the Norwegian economy, and creates big spin-offs nationwide. Just under 150 000 people are directly employed in the petroleum sector. KonKraft report 7 deals with the Norwegian gas industry, activities related to gas exports, operations at the land-based plants and the use of gas in Norway. This report also identifies development opportunities as gas operations move north up the Norwegian continental shelf (NCS). In addition, it discusses terms and frame conditions for expanding the use of gas for industrial purposes in Norway. And a more detailed description is provided of operations and spin-offs which could be generated by greater activity in the far north. The economic effects of petroleum activities concern far more than the human resources mobilised in direct relation to each field development. Another form of direct spin-off is the operation of offshore installations with associated bases, transport services and logistics. StatoilHydro, for example, maintained a portfolio of 17 transport helicopters, four rescue machines and two charter helicopters at six different Norwegian bases in 2007. Base operations not only play a key role in offshore operations but also lay the foundation for further industrial development not least with supply services. A case in point is the Bergen Base at Ågotnes, which also embraces an industrial site currently occupied by more than 100 companies with some 1 600 workyears. The base receives almost 2 000 ship calls every year. Another example is Kristiansund Base (Vestbase), which serves a number of fields in the Norwegian Sea and provides some 750 jobs on its site. Roughly 50 people work at the Sandnessjøen base, which is responsible for supplying the Norne field and had almost 390 ship calls in 2007.
Land-based plants for processing oil and gas Direct effects are also created by establishing land-based plants and processing facilities for oil and gas. Norway has six such installations today, which collectively employ about 3 500 people. However, operations at each of these plants generate extensive spin-offs in the form of investment and support for engineering, operation and business development. Kårstø north of Stavanger The Kårstø gas processing and condensate plant was originally built to receive rich gas from Statfjord in 1985. A number of other fields have since been tied into the Statpipe system, and Kårstø also accepts rich gas through Åsgard Transport and unstabilised condensate from the Sleipner fields. Incorporating one of Norway s largest ports, this facility is a significant industrial employer with 1 100-1 300 personnel depending on project activities. The plant is a substantial taxpayer to Tysvær, the local authority in which it stands. Operating Kårstø creates substantial effects in its local area, and more than half the deliveries to it come from the surrounding county of Rogaland. Kollsnes and Sture near Bergen The Kollsnes gas treatment plant receives gas from Troll, Kvitebjørn and Visund. It is Norway s largest facility of its kind in volume terms, and thereby one of the biggest in the world. Its export capacity is more than 140 million cubic metres of gas and 69 000 barrels of condensate per day. Together with the Sture terminal, activity at Kollsnes plays an important role in the economy of Øygarden local authority. A solid team of specialists has been established, with links to other local gasbased operations primarily Gasnor. Nyhamna The processing plant for gas from Ormen Lange stands at Nyhamna in Aukra local authority. Wellstreams landed there are processed and separated into sales gas, for export through the Langeled pipeline to the Sleipner area, and condensate. The latter is stabilised and stored in a rock cavern before export by ship. Operational since September 2007, the Ormen Lange facility represents a long-term industrial development for Aukra. Employment related to the Nyhamna plant currently totals just under 350 people. This figure is expected to increase when phase II of the field development begins. Operator Shell has about 70 personnel at the terminal, which has been built for an economic life of 30 years. Parts of the infrastructure could operate for up to 50 years. Daily capacity is 70 million cubic metres of sales gas and 35 000 barrels of condensate.
5 Tjeldbergodden in mid-norway The Tjeldbergodden industrial complex in Nordmøre opened in June 1997 and currently embraces a methanol plant, a gas receiving terminal, an air gas plant and a gas liquefaction plant. With some 130 employees, the methanol facility ranks as one of the world s largest. Its opening represented the first large-scale industrial application of natural gas in Norway. Production capacity is roughly 900 000 tonnes per year, based on gas from Heidrun on the Halten Bank. Hammerfest in Finnmark The wellstream from Snøhvit in the Barents Sea is landed at Melkøya outside Hammerfest in the far north, where condensate gets separated and stabilised. The dry gas is cooled down to liquid form. Both condensate and liquefied natural gas are exported by ship. This is the only plant in the world which also removes carbon dioxide from the natural gas for return to the field and injection into a separate subsurface formation. Mongstad near Bergen The facilities at Mongstad have been operational since the mid- 1970s, and currently comprise an oil refinery, a fractionation plant (Vestprosess) for natural gas liquids and a crude oil terminal. With an annual capacity of 10 million tonnes of oil, the refinery is the biggest in Norway. The port of Mongstad is the country s largest measured by tonnage and Europe s second-biggest for oil after Rotterdam in the Netherlands. Energy currently account for roughly 50 per cent of operating costs at the refinery, which is about 30 years old. Process heat is poorly used and much energy gets wasted. A new combined heat and power station now under construction will cut operating costs and make energy supplies more stable. The Mongstad facilities employ some 3 500 people in all, but each also yields extensive effects in the form of investment and support for engineering, operation and business development.
Employment Roughly 40 000 people are directly employed by oil and gas companies in Norway. In addition come about 20 000 jobs in refining and other petroleum-related activities, such as gas processing, petrochemicals and plastics. The industry also has great significance for employment far beyond these sectors, not least in the supplies business, technology companies, research and government administration. Specialised deliveries to the oil and gas industry were estimated to account for about 85 000 work-years in 2007. Total direct employment related to the Norwegian oil and gas industry is put at just under 150 000 people. By comparison, slightly over 55 000 were employed in agriculture and related services, and rather more than 15 000 in fishing, catching and fish farming. The oil and gas business accordingly ranks as the industry with the greatest significance for jobs and economic activity in mainland Norway. Examples of geographic value-creation clusters Møre og Romsdal: Offshore services 179 companies 17 400 employees Verdal networ: Fabrication/renewables 17 companies 1 990 employees Globally leading technology Substantial market shares More than NOK 100 billion invested annually on the NCS Almost NOK 100 billion in international turnover Challenge in the future will be to create a north Norwegian cluster Sogn og Fjordane: Offshore fabricators 5 companies 5 000 employees Asker/Bærum: Engineering Stavanger: Drilling/well technology 100 companies 28 000 employees Southern Norway: Node/drilling equipment 50 companies 4 000 employees Kongsberg: Subsea/maritime 34 companies 6 200 employees
7 Total direct employment related to Norway s oil and gas business can be estimated at just under 150 000. Supplies industry The supplies industry has expanded its capacity not only to serve operations on the NCS, but also to achieve a sharp increase in foreign sales. Even with a very high level of activity off Norway, the Norwegian supplies sector exported goods and services worth almost NOK 100 billion in 2008. This makes the industry the second largest export sector in Norway after the oil and gas business itself, providing another example of the way the core activity on the NCS generates spin-offs in the rest of the Norwegian economy. Local effects The petroleum industry creates substantial local spin-offs around Norway. That applies not only to the city of Stavanger, where most of Norway s oil business is located, but also to urban centres such as Oslo, Bergen, Florø, Kristiansund, Trondheim, Brønnøysund, Sandnessjøen, Harstad and Hammerfest as well as to the local authorities hosting land-based plants associated with offshore operations. Almost 300 jobs in Harstad relate to the petroleum sector, or 2.5 per cent of total employment in the area. As a proportion of the workforce, that corresponds to 10 000 people in Oslo and 4 000 in Bergen. In addition come spin-offs from the demand generated by the core business. The Snøhvit plant outside Hammerfest employs some 500 people. StatoilHydro has 220 employees, 70 per cent of whom are recruited from northern Norway. Direct petroleum-related employment in Kristiansund totals 2 100 work-years. The Møreforskning research institute has calculated that indirect employment amounts to almost 1 400 work-years. About 20 per cent of all employees in the local authority have a petroleum-related job, which again provides a good example of the great significance which spin-offs from petroleum activities can have for a community. Gas deliveries to Europe Norway is on its way to becoming the world s largest exporter of natural gas, behind Russia and ahead of Canada, with foreign sales of almost 100 billion cubic metres in 2008. That makes the country an important supplier of gas to the rest of Europe. This business in itself creates big local spin-offs, primarily related to the gas landfalls along the whole coast Kårstø, Kollsnes, Nyhamna, Tjeldbergodden and Melkøya. The report describes activities at these industrial plants, and outlines their local significance.
FINNESTAD AS Using more gas in Norway Substantial gas resources have been discovered as activity on the NCS has shifted northwards from the North Sea and into the Norwegian Sea. These are also found off Nord-Trøndelag and Nordland counties, and the report outlines various options for exploiting the discoveries as well as some of the main problems related to further development in the Norwegian Sea. Understandably enough, Norway s natural gas consumption is modest compared with its exports of this commodity. Norwegian use of gas has nevertheless expanded sharply in recent years. It primarily replaces fuel oil, but some is also utilised in the transport sector. Small-scale gas liquefaction takes place at Kollsnes, Karmøy and Tjeldbergodden. Inland distribution in Norway occurs largely by road or sea as liquefied natural gas (LNG). This solution has proved highly flexible, and the country currently possesses some 30 LNG reception facilities. Although uncertainty exists about frame conditions, gas consumption is expected to rise in coming years. The report also discusses opportunities for expanding the industrial use of gas in Norway. One example is feedstock for gas conversion processes which create new products. Depending on how gas prices are viewed in the various markets around the world, opportunities could arise for developing more such industry in Norway to supplement existing operations in the Grenland area south of Oslo and at Tjeldbergodden. KonKraft report 7 looks at significant factors for this type of industrial growth in Norway, and how these elements might come into play when new gas discoveries are to be developed. Fields found further north could make such projects more relevant than they have been so far. An important reason for this is that gas volumes could be found which would be unreasonably expensive to transport. That might make the option of converting the gas into finished products more attractive. KonKraft is a collaboration arena for: