Norway backs Barents oil push, holds back Lofotens

OSLO Fri Mar 11, 2011 10:25am EST

OSLO (Reuters) - Norway's new plan for Arctic oil and gas exploration pleased greens by keeping the unique Lofoten archipelago off limits for now, while dangling prospects for opening more Barents Sea areas to the powerful oil industry.

The oil lobby's initial reaction to the updated management plan for northern Norway was cool but the compromise deal may have saved Prime Minister Jens Stoltenberg's center-left coalition government midway through its second term.

The government said it would not carry out an impact study of drilling in the fish-rich Lofoten waters in the Norwegian Sea until this parliamentary term ends in 2013, but would push ahead with opening a recently delineated Barents Sea zone.

"This is proof that it pays to persevere," said Lars Haltbrekken, leader of Friends of the Earth Norway, adding that Lofoten research and "fantastic enthusiasm in the whole country has allowed us to stop a powerful and desperate oil lobby."

Oil companies have been demanding access to new areas off Norway, the world's No. 5 oil exporter whose output has fallen 45 percent from a 2001 peak.

"The government will maintain exploration activity for oil and gas and allow the oil industry access to interesting exploration areas within an environmentally safe framework," Stoltenberg told a news conference.

Outside the venue, a hundred-or-so green campaigners sang "Victory is ours!," many of them waving Norwegian flags and wearing traditional costumes.

The government agreed to conduct the assessment study of oil and gas exploration the Barents Sea zone quickly after Russian authorities ratify the sea boundary deal signed last year.

The study will be the first step toward opening the remote region off of Europe's northernmost tip, which according to communist-era studies has abundant oil and gas.

Seeking to strike a balance between the greens and the oil industry, which to a large degree funds Norway's generous welfare state, the government said informal "information gathering" off the Lofotens may still take place. Such information could be used if a formal impact study is ordered.

OIL INDUSTRY DISAPPOINTED

The main oil lobby OLF said it was "very dissatisfied" with the Lofoten decision and although the Barents Sea move was encouraging, it did not replace the appeal of the Lofotens due to a longer time-horizon of projects in the high north.

Norwegian energy champion Statoil said that without new exploration areas and big new oil finds, Norwegian shelf production will fall "significantly" after 2020.

Norway's Environment Minister Erik Solheim said it would be at least 10 years before oil production began in the new Barents Sea zone, although seismic data and studies could take place very soon.

Asked by Reuters how quickly drilling could start once Russia ratifies the border treaty, Norway's oil and energy minister Ola Borten Moe said: "After we start the process, it usually takes about two to three years."

"I am a little bit surprised by the OLF reacting so negatively," he added. "The government has today made available large areas for oil exploration."

Drilling off the Lofoten and nearby Vesteraalen islands was by far the most contentious issue for the center-left government between Stoltenberg's powerful Labour party, the Socialist Left and the Center Party.

"Without an agreement it would have been the end of the red-green coalition," said Bernt Aardal, analyst at the Institute for Social Research. "The Socialist Left has lost a number of big environmental issues to Labour lately and had to draw the line (at the Lofoten drilling debate)."

(Additional reporting by Wojciech Moskwa, Victoria Klesty and Walter Gibbs; Editing by Anthony Barker and Keiron Henderson)

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