Environmental and climate considerations are an integral part of Norway’s policy for the petroleum industry. A range of policy instruments ensures that actors in the industry take environmental and climate considerations into account during all phases of their activities, from exploration to development, operations and field closure.
Environmental and climate standards in the Norwegian petroleum industry are very high compared with those in other countries. This is a result of effective policy instruments and joint initiatives between the authorities and oil companies on research, technology development and competence-building.
Emissions to air from petroleum activities largely originate from the combustion of natural gas and diesel in turbines, engines and boilers, flaring of natural gas for safety reasons, venting and diffuse emissions of gas, and storage and loading of crude oil. These activities result in emissions of waste gas containing CO2 (carbon dioxide), NOx (nitrogen oxides), NMVOCs (non-methane volatile organic compounds), CH4 (methane) and sulphur dioxide (SO2).
Emissions from Norwegian petroleum activities, in other words from facilities on the continental shelf and from onshore facilities that come within the scope of the petroleum legislation, are regulated through several acts, including the Petroleum Act, the CO2 Tax Act on Petroleum Activites, the Sales Tax Act, the Greenhouse Gas Emission Trading Act and the Pollution Control Act.
Requirements for impact assessments and approval of plans for new developments (PDOs/PIOs) are cornerstones of the petroleum legislation. Facilities onshore and within the baseline are also subject to the provisions of the Planning and Building Act.
Emissions from the petroleum sector in Norway are well documented. The industry’s own organisation, the Norwegian Oil and Gas Association, has established a national database for reporting all releases from the industry, called EPIM Environment Hub (EEH). All operators on the Norwegian continental shelf report data on emissions to air and discharges to the sea directly in EEH.
In 2015, greenhouse gas emissions from petroleum activities corresponded to about 14.2 million tonnes CO2 eq (carbon dioxide equivalent), most of which (13.5 million tonnes) was CO2, and the rest methane. This is equivalent to about one quarter of Norway’s aggregate greenhouse gas emissions in the same year.
CO2 emissions from the petroleum sector are expected to be fairly stable over the next few years.
Greenhouse gas emissions from the petroleum sector
Historical numbers for 1997-2015 and projections for 2016-2020
Source: Norwegian Petroleum Directorate
The companies operating on the Norwegian shelf are world leaders in the use of solutions to reduce greenhouse gas emissions. Emissions per unit of oil and gas produced are therefore lower than those from similar operations in other petroleum-producing countries.
Energy efficiency measures, including the introduction of energy management systems and the installation of more energy-efficient equipment such as compressors and pumps, have helped to reduce emissions from petroleum activities. Combined-cycle gas turbines (CCGT) are one technological solution, in which waste heat from the turbines is used to produce steam, which in turn is used to generate electricity. CCGT plants improve energy efficiency and reduce emissions. They have been installed on the fields Oseberg, Snorre and Eldfisk.
Since 1996, about 1 million tonnes of CO2 per year has been separated during processing of natural gas from the Sleipner Vest field, and stored in the subsea Utsira formation. Since 2014, CO2 has also been separated from natural gas from the Gudrun field and stored in the Utsira formation. The Snøvhit facility on Melkøya separates CO2 from the wellstream before the gas is chilled to produce liquefied natural gas (LNG), and has been doing so since 2008. The CO2 is transported back to the field, injected and stored.
The fields Ormen Lange, Snøhvit, Troll 1, Gjøa, Valhall and Goliat are already supplied with power from shore, and the same solution will be used on Martin Linge and Johan Sverdrup when they come on stream. A joint solution for supplying power from shore to the Utsira High region will be in place by 2022 at the latest, and the fields Edvard Grieg, Ivar Aasen and Gina Krog will all be connected to it. In addition, the onshore facilities Kårstø, Kollsnes, Melkøya LNG and Nyhamna are supplied partly or wholly with power from the grid. At present, these fields and facilities account for the majority of Norwegian gas production.
CO₂ emissions from petroleum activities in 2015, by source
Source: Norwegian Petroleum Directorate
The carbon tax and the Greenhouse Gas Emission Trading Act are Norway’s most important cross-sectoral climate policy instruments for cost-effective cuts in greenhouse gas emissions. Both of these instruments apply to the petroleum industry, while most other sectors either have to take part in emissions trading or pay the carbon tax.
The carbon tax
Norway was one of the first countries in the world to introduce a carbon tax, in 1991. This is levied on all combustion of gas, oil and diesel in petroleum operations on the continental shelf and on releases of CO2 and natural gas, in accordance with the CO2 Tax Act on Petroleum Activites. For 2017, the tax rate is NOK 1.04 per standard cubic metre of gas and NOK 1.04 per litre of oil or condensate. For combustion of natural gas, this is equivalent to NOK 436 per tonne of CO2. For emissions of natural gas, the tax rate is NOK 7,16 per standard cubic metre.
Greenhouse Gas Emission Trading
Norway’s Greenhouse Gas Emission Trading Act entered into force in 2005, and Norway joined the EU Emissions Trading System (EU ETS) in 2008. This means that Norwegian installations in the petroleum industry and other industries to which the system applies are subject to the same rules for emissions trading as those within the EU. The EU ETS is now in its third phase, which runs up to 2020.
The EU ETS is a ‘cap and trade’ system, which sets a ‘cap’, or limit, on total greenhouse gas emissions within the system. This cap is reduced year by year so that the emission target for sectors covered by the system is met by the end of the period. Emission allowances are allocated by auctioning or free of charge. Sectors that are considered to be at risk of carbon leakage receive some or all of their allowances free of charge, following harmonised allocation rules. This applies to a certain proportion of petroleum-sector emissions to which the ETS applies. Allowances for emissions from heating and electricity generation on offshore installations are not allocated free of charge.
If a company’s emissions exceed its free allocation, it must purchase additional allowances from other companies within the system. Companies that cut their emissions so much that they have a surplus of allowances can sell them to others. Thus, the trading system provides incentives for cost-effective cuts in greenhouse gas emissions. In 2016, the average cost of an emission allowance entitling the holder to emit one tonne of CO2 was approximately 5,3 euros, corresponding to NOK 50.
The combination of the carbon tax and the emissions trading system means that companies on the Norwegian shelf pay approximaterly NOK 500 per tonne for their CO2 emissions, which is higher than in other sectors in Norway and very high compared with carbon prices in other countries.
Permits and other requirements
Before the licensees can develop a discovery, their plan for development and operation (PDO) must be approved by the Ministry of Petroleum and Energy. The PDO contains information on how the licensees intend to develop and operate the field. Whenever proposals are made for new field developments or large-scale modification of existing facilities, the operator must as part of the PDO include an overview of energy needs and an assessment of the costs of using power from shore rather than gas turbines to supply electricity.
Flaring of natural gas is only permitted when necessary for safety reasons. Permit for flaring are issued by the Ministry of Petroleum and Energy.
A permit under the Pollution Control Act is required for emissions to air from petroleum operations.
In 2015, the petroleum sector accounted for about 35 % of Norway’s total NOx emissions. Emissions fluctuate to some extent from year to year, but have remained at roughly the same level since the early 2000s.
However, less use of moveable facilities resulted in reduced emissions of NOx in 2015.
NOx is a generic term for two oxides of nitrogen, NO and NO2. They cause acidification of river systems and soils, which has direct environmental impacts including harm to fish, wildlife and ecosystems. NOx emissions also have indirect impacts because they are involved in the formation of ground-level ozone, which can damage vegetation and materials. In addition, NOx can trigger respiratory complaints. Studies show that the environmental impacts of NOx emissions vary considerably depending on where they take place, and that emissions in urban areas have the most serious effects.
CO2 and NOx emission levels are closely linked. The main sources of NOx emissions from offshore installations are the same as for CO2: combustion of gas and diesel in turbines and engines. The level of emissions depends both on the technology used and on fuel consumption.
Under the Gothenburg Protocol, Norway has undertaken to reduce its overall NOx emissions by 23 % by 2020 compared with the 2005 level. Emissions from the petroleum sector are directly regulated by means of conditions included in plans for development and operation (PDOs) and in permits under the Pollution Control Act.
In 2007, Norway introduced a tax on NOx emissions to encourage cost-effective emission cuts. For the petroleum industry, the tax applies to emissions from large gas turbines and machinery, and from flaring. Businesses that are affiliated with the environmental agreement between the Norwegian state and a number of business organisations on measures to reduce NOx emissions are exempted from the tax.
Most companies in the petroleum sector have chosen to participate in this agreement, and pay a contribution of NOK 11 per kg NOx to the NOx Fund. For companies in other branches of industry, the contribution is NOK 4 per kg NOx. The fund’s income is used to support investments by companies that are parties to the agreement to reduce their NOx emissions.
Historical and projected emissions of NOx from the petroleum sector in Norway, 1997-2020
Source: Norwegian Petroleum Directorate
The main source of NMVOC emissions from petroleum activities is storage and loading of crude oil offshore. Gas terminals are another smaller source of these emissions.
Since the early 2000s, NMVOC emissions from the petroleum sector have been substantially reduced, mainly as a result of investment in NMVOC recovery equipment. From 2013 to 2014, these emissions rose, and accounted for more than one third of Norway’s total emissions. A certain reduction in NMVOC emissions is expected in the next few years.
Under the Gothenburg Protocol, Norway has undertaken to reduce its overall NMVOC emissions by 40 % by 2020 compared with the 2005 level. Emissions from the petroleum sector are directly regulated through requirements on the use of the best available techniques (BAT) and specific emission limits in permits under the Pollution Control Act.
NMVOCs stands for non-methane volatile organic compounds, and is a generic term for organic compounds that readily evaporate from oil, with the exception of methane. In the presence of sunlight they contribute to the formation of ground-level ozone, which can cause damage to health, vegetation and materials.
In addition, direct exposure to NMVOCs can cause respiratory problems, and they contribute indirectly to the greenhouse gas effect because CO2 and ozone are formed when NMVOCs react with oxygen in the atmosphere.
Historical and projected emissions of nmVOC from the petroleum sector in Norway, 1997-2020
Source: Norwegian Petroleum Directorate