Deal with Norway to boost oil and gas production

Wednesday, Jan 19, 2005

Norway and Britain have agreed a treaty that could stimulate oil and gas production worth more than Pounds 1bn from small fields straddling their North Sea boundary. The Department of Trade and Industry expected a formal announcement next month when Mike O'Brien, the energy minister, would visit Norway.

The countries both produce oil and natural gas from offshore fields. Some fields - such as Statfjord, Frigg and Murchison - are in production and others that could be developed are beneath waters claimed by both nations.

The treaty will cover the development of Norway's smaller fields, but also the use of installations on one continental shelf to exploit resources on the other side of the boundary and the construction of pipelines, including land pipelines.

Mr O'Brien said last night: "We've reached agreement and there are no outstanding differences between us on this milestone treaty. We are in the last stage of tidying the text, which will pave the way for unprecedented co-operation between the UK and Norway and major new opportunities in terms of trade and exploitation of North Sea reserves."

Thorhild Widvey, Norwegian oil minister, said: "I'm happy to be able to say that we have now agreed on a framework treaty with the British. This will be a good basis for future co-operation."

The two governments started negotiations several years ago, based on recognition that the UK would become a net importer of energy in the medium term and that Norway had a growing ability to export energy to the UK.

Norway, the world's third largest oil exporter after Saudi Arabia and Russia, expects its oil production to decline as its biggest fields age.

It wants to develop smaller fields as a way of maintaining capacity, which is 3.2m barrels of oil a day. Many of these smaller fields straddle the maritime boundary between the two territories.

The treaty will cover the redevelopment of existing fields and decommissioning of outdated production facilities, a potentially huge industry.

It is also expected to encourage a cross-border approach to sea-air rescue and the use of standby vessels.

By ANDREW BOLGER