June 6: 'Not for the climate'
StatoilHydro runs a number of interesting green energy projects in offshore wind and carbon storage. It's not political pressure that makes them do so, nor environmental arguments. It's just because they expect to run a business on it, says communication manager New Energy, Øystein Johannessen.
What is the psotition of renewable energy within StatoilHydro?
“New Energy is one of three priorities of StatoilHydro. The first is maximising potential of oil and gas on Norwegina shelf, the second to grow internationally as an oil and gas company and the third is a stepwise approach into new energy. Within New Energy we think of renewable energy as a business opportunity. There's is nothing we do because of climate or green arguments. We do it because we see as an energy producer this is going to be an interesting market in the future.
Within New Energy, we want to use our competence from oil and gas in a way that can give us a competitive edge, that's why our priorities are on offshore wind, CCS and biofuels. Within offshore wind we have decided to build the Sheringham Shoal project (315 MW offshore wind in UK, ed.), together with Statkraft, on shallow water with bottom-fixed turbines.”
What is the percentage of investment in renewable energy by Statoil?
“We don't have that figure. It's very little. You can't compare it actually. Let's be honest about that.”
In Norway, StatoilHydro seems to have a monopoly on renewable energy projects. What happens to the interest in new energy if the income from oil drops?
“There is no guarantee on that. Right now, we're in the middle of this. We experienced a drop from 150 dollars per barrel to 40 in no time. So how does that affect our investments? One of the key challenges we experienced was the Sheringham Shoal project. It was the first big renewable energy project in our portfolio. We had the investment decision this autumn. There was a go-ahead both from the management and the board of the company, but with one criterium: we had to find a partner. Because it is a first time for us and we don't want to do it alone. It's a ten billion NOKs investment. We started finalising the partner process and then the crisis hit us really hard. All the partners. And then we got the oil price drop and we had to go over the whole portfolio again including this project. We were extremely worried about the project since it's not core oil and gas. What happens to it. The rate of return was solid, the economics of the project was solid, but we couldn't find a partner. Of course there was uncertainty about this NE project in this climate. We found a partner in Statkraft. That happened in the middle of the financial crisis where the cash flow hit the company very hard. We looked at the whole portfolio and still decided to invest in the Sheringham Shoal project.”
But it's hard to find others who do so as well.
“You have to understand this picture that illustrates the really big challenge for renewable energy. You need investors that have trust in this kind of uncertain markets because you're dependent on political incentives for the market to be interesting and when you see these financial challenges, it makes you understand how challenging it is to evolve this kind of business. If Sheringham Shoal becomes a failure, it's going to be distastrous for the way we look at renewable energy, definitely. It's so important for this project to be a succes, because then we demonstrate for the whole oil and gas that it's interesting, it's wise to invest in renewable energy even in times like this. But if it becomes a failure, everybody will say: we told you – stay away from renewables.”
That's what Shell did.
“Yes, Shell has done that, BP too. Most companies are now pulling out of renewables.”
Some people say StatoilHydro invests in renewables because it's state-owned.
“There is no poltical pressure involved here. In fact we almost get offended when people suggest that. That we simply cannot be doing this voluntarily.”