Arctic Oil Drilling Threatens Norway Government

Gwladys Fouche, PlanetArk 14 Apr 10;

A classic battle pitting the oil industry against environmentalists and fishermen in Norway's Arctic seas is set to intensify on Thursday when the most thorough environmental study of the project to date is released.

Extracting oil from the chilly waters off the Lofoten and Vesteraalen islands is so divisive it could wreck the ruling Labour Party's coalition in this Nordic state that is the world's fifth largest oil and third largest gas exporter but also sees itself as a leader in environmental policies.

"If I were to point to one conflict that could spell the end of the present government, it would be this issue," said Frank Aarebrot, professor of comparative politics at the University of Bergen.

The Labour Party, led by Prime Minister Jens Stoltenberg, has kept the door open for drilling and has in the past been a supporter of the oil industry. But Labour's coalition partners, the Socialist Left and the Center party, are against.

The report commissioned by the environment ministry will assess conditions in the seas off the Arctic islands and assess the potential risks posed by oil and gas activities.

The area off Lofoten could hold some 20 percent of all remaining undiscovered reserves on the Norwegian continental shelf, according to the Norwegian Petroleum Directorate (NPD), at a time when petroleum production is on the decline.

Oil production in Norway peaked in 2001.

"In the long run Norway cannot afford not to investigate what is out there," Oystein Michelsen, Statoil's head of exploration and production in Norway, said.

"It's important for the country, there is a lot of value there. We should benefit from it," he told Reuters.

Not everyone is welcoming a potential oil boom in the region, however.

The seas off the islands are home to the spawning grounds of the world's largest cod stock and fishermen and environmentalists fear oil activities could endanger them.

"If any marine areas in Europe should be protected against the risk of oil exploration, these are the first candidates," said Rasmus Hansson, Secretary General of the World Wildlife Fund in Norway.

"They are the most productive and most valuable marine areas in Europe, no doubt about it," he told Reuters.

Thursday's report will be followed Friday with NPD's own report evaluating how much oil and gas could potentially be found in the areas, the result of seismic surveys it conducted.

The government is expected to make a decision on the issue by the end of 2010.

Aarebrot anticipated that Labour would be willing to break up the governing coalition on the issue as it could continue governing in a minority government.

In addition, he said, the politicians ruling northern Norway, a Labour stronghold, are in favor of oil drilling.

"It will be very difficult for Labour to deny the people in the North to have the same possibilities as the people in the West (where the oil industry in based) because they have many representatives in that region," he said.

(Editing by Michael Roddy)