When Norwegian energy giant StatoilHydro fired up the world’s northernmost liquefied natural gas plant here last year it was hailed as an industry pioneer.
But turning Arctic gas into gold has proven anything but simple, AFP reported.
“It is true that we’ve had some problems with the budget, with some of the technology and with CO2 emissions,“ acknowledged Sverre Kojedal, a spokesman for StatoilHydro’s Snoehvit (Snow White) gas field and LNG plant project.
Snoehvit and two satellite gas fields set to feed the brand new LNG plant on the northern Norwegian Melkoeya Island, about 2,000 kilometers from the North Pole, are believed to hold about 193 billion cubic meters of recoverable natural gas.
Statoil, which late last year expanded to become StatoilHydro, has been eager to get at the gas, worth tens of billions of euros, since the field was discovered in the mid-1980s.
The elaborate web of entirely sub-sea equipment located at depths of up to 340 meters and the 145-kilometre (90-mile) pipeline that transports the gas to land before it is liquefied is seen as one of the company’s most prestigious and pioneering projects. It was intended to secure the Norwegian company’s place as a front-runner in the race to extract Arctic oil and gas riches that have become increasingly accessible due to new technologies and because of the effect of global warming on the polar ice cap.
Unforgiving Climate
But building an LNG plant based on brand-new technology in an unforgiving Arctic climate has proven more complicated and far more costly than expected.
StatoilHydro, which owns a 33.5-percent share and operates Snoehvit, and its partners paid nearly 50 percent more than the budgeted 39 billion kroner (7.6 billion dollars, 4.9 billion euros) to build the project, which only came online last September, a year behind schedule.
The company appears to have “sped a bit too quickly through the planning phase,“ Enskilda analyst Arnstein Wigestrand told AFP.
Some of the problems encountered were perhaps to be expected so far north. When a massive storm swept the area under construction in January 2006, sending the mercury on Melkoeya plunging below -20 degrees Celsius for more than a week, some 1,500 workers had to be evacuated.
They were shuttled into nearby Hammerfest, which counts just 9,500 inhabitants, sending town officials scurrying to find accommodation.
With not enough houses to hold them, nearly half the workers ended up bunking on a passing coastal cruiser.
And when production finally began the flares used to release pressure spewed an unexpected cloud of soot over the entire region, including Hammerfest, riling locals and causing concern among environmentalists already wary of the effect of energy production on the vulnerable Arctic ecosystem.
“There was some soot ... and of course people didn’t like it,“ Kojedal said, standing in the heat of one of two huge flares overlooking the snow-blanketed industrial complex that covers the entire one-square-kilometer island.
Start-Up Time
The plant has since reduced its start-up time from three weeks to about six hours and greatly reduced the amount of soot released in the flaring process, he said.
Asle Roenning of WWF Norway said the Melkoeya soot cloud was not only a local nuisance but also ’unfortunate’ from a global warming perspective.
“One of the contributing factors mentioned when it comes to the melting of the polar ice cap is soot, often from ships in northern waters,“ he told AFP, pointing out that soot-lined ice could not deflect sun rays as efficiently, thus raising temperatures.
Environmentalists are especially critical of soaring carbon dioxide emissions from the new LNG plant.
According to Norwegian media reports, it spewed out 10-months worth of CO2 emissions--some 1.1 million tons, or about 2.0 percent of Norway’s overall annual carbon emissions--in the first two months of production alone.
“It is unfortunate that StatoilHydro ahead of time described how they mastered the technology part and would only emit so much,“ said WWF Norway climate and gas advisor Arild Skedsmo.
“Now, after they have spent nearly 60 billion kroner to develop this, it is very hard (for the authorities) to say they can’t emit an extra ton because of their technical problems,“ he added.
At a financial level, observers say the Melkoeya plant has been hemorrhaging money since the get-go.
The facility, plagued by technical problems, has remained shut down for long periods and, when it is up and running produces no more than about 60 percent of an anticipated full capacity of some 20 million standard cubic meters of gas (SCM) per day.
As seagulls pitch overhead in the sub-zero spring wind and icy dark waves crash against black rocks below, Kojedal points out that Snoehvit is the first ever offshore project and first gas development in the Barents Sea.
“Being an industry pioneer means a lot to take care of,“ he said.
