Appendix VI. The future of the northern regions
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Peter Arbo and Gunnar Sander
Oil and gas activities in the north are predicted to have significant prospects. The government in Norway has designated the northern regions as being of the utmost priority, while the NHO- Confederation of Norwegian Enterprice has issued a publication entitled “The task facing the north”. North Norway is predicted to have a bright future. Now, at a time when expectations have been pushed to the limits, it would not be a bad thing to recall that development may take several different directions. The development strategies elaborated must also take alternatives into account.
At the beginning of the 1980s, a large degree of optimism prevailed in North Norway. It was proven that oil and gas were present on the coast. Key political figures travelled up and down the country telling people about the oil miracle which had sprung up. Many towns compiled reports and drew up plans for sharing in future economic growth. Significant investment had already been made, but not everything proceeded as planned. Production areas and centres continued to stand empty. The majority of enterprises geared towards offshore oil and gas production endured failure, with optimism giving way to despair. How should we prevent history from repeating itself? Despite the fact that North Norway needs various kinds of investment, experience has shown how much risk can be involved when not allowing for uncertainty.
Sugar-coated perspective
At a general meeting of the NHO in January 2006, ECON presented its outlook for the future in a publication entitled “Ripples on the water”. This publication represents desired development for the northern regions, practically everything points in a positive direction: By 2025, North Norway will emerge from its regional stagnation to become the country’s energy centre. By looking at just a single alternative in this report, no allowance was made for uncertainties. No one discussed what would happen should everything not proceed as perfectly as assumed. This demonstrates how scenarios can be utilised to achieve objectives which, above all, are associated with persuasion and legitimisation.
Scenarios
It is said that the only thing which can be said for certain about the future is that it is uncertain. From a short-term perspective, one may proceed from the assumption that everything will stay as it is now. However, the further into the future we go, the more difficult it is to make predictions. Rapid and more unpredictable changes force us to be prepared for the unexpected. In this situation, development scenarios may help. The notion itself stems from theatrics, where all the action takes place according to scenes in accordance with the written script. From the world of theatre, this notion made its way into the military field, and from there into the sphere of activities undertaken by large-scale enterprises, departments and other State institutions. From the 1970s onwards, scenarios were increasingly used as an instrument for long-term, strategic planning. This method became prevalent and gradually, the “scenarios” concept became more and more blurred, given that practically any pronouncement concerning the future was naturally referred to as a scenario.
Unlike forecasting trends, which are applied when we are sufficiently sure of how the situation will develop in future, the scenario method allows uncertainty to be expressed in the form of an alternative development picture. These pictures are formed from today’s observations and deductions and are not an impetuous flight of fancy by any means. Scenarios must be feasible, logically well founded and consistent. They should not just describe things as they will be in future, but the sequence of events leading up to them. For this, it is necessary to determine the driving forces, tension and events which are, or will be, important.
Scenarios reflect diverse possibilities. Their aim is to broaden views of possible developments and reveal more potentialities, to improve preparedness and the ability to adapt to new conditions. A key moment is examining the existing notion and conducting a critical analysis of the suggestions and expectations which are used as a basis today. Work on scenarios facilitates topical reflection of what is possible and desirable in the future. The idea does not entail choosing the most favoured scenario. Instead, it is necessary to study the differences between the scenarios and use these to draw up the most successful strategy for achieving the desired result. Having initiated debate on this topic and stimulated people’s imaginations, work related to scenarios may, in future, make its own contribution to organising the future.
In the work concerned with organising a management plan for the Lofoten Islands in the Barents Sea, alternative scenarios were drawn up. This plan has been worked out for the period up to 2020, with factors influencing the environment, such as the opening up of oil and gas fields, fishing, shipping and climatic changes, taken into consideration in its development. This article considers three brief development scenarios up to the year 2025. The main aim is to reveal those factors which will have an impact on the development of the situation in the Barents Sea. We will also pay attention to the significance of this development as far as North Norway is concerned.
Scenario 1: Klondyke
Asia is continuing to experience rapid economic growth. From 4th place in 2005, China will rise to 2nd place by 2025 in terms of economic development. China and India will become the new giants of world trade. A twofold improvement in the standard of living of several billion people will lead to a sharp increase in man’s need for raw materials and energy. Falling domestic manufacture in the USA and Europe will also lead to an increase in demand. Despite investment in alternative sources of energy for lighting and heating purposes in houses and apartments, the transport sector will remain dependent on fossil fuels. Most of the oil will come from the Middle East. Countries in this region have large oil reserves, while the cheapest production methods are to be found in the uninhabited regions of countries in the Gulf of Mexico. However, given the politically unstable and corrupt regimes here, these countries are trying to obtain petroleum products from a variety of sources.
Estimates that in the region of 24% of all unexplored oil reserves are to be found in Africa, have led to large-scale exploration work being conducted in Polar regions. Valuable oil and gas fields were discovered in 19 licensed areas. Work on their development is actively being carried out in both the western and eastern sectors of the Barents Sea. The USA and EU countries are urging Norway and Russia to come to an agreement on the demarcation of the Barents Sea, so allowing field development work to be carried out in the adjacent area of the Barents Sea. In the package agreement which has been reached, Russia has obtained the lion’s share of this region. In return, Norway has obtained recognition of the fact that the Spitsbergen archipelago is a continuation of Norway’s Continental shelf. Thus, it has become possible to carry out development work in the northern part of the Barents Sea according to the same rules as apply in the south. The companies “Statoil” and “Norsk Hydro” are participating in the development of the Shtokman field. The technology and experience which these companies accumulated when working on the Belosnezhka and Ormen Lange fields proved very valuable for this field as well. Norwegian companies also started to participate in the development of other fields, particularly Kil’din, Murmansk and Led.
In the main, the structural solution for developing fields involved locating oil production installations on the sea bed, operated from the shore, with oil and gas pumped ashore. New power and pumping technologies allowed work to be carried out even further away from shore. The Norwegian pipeline was extended further north, no longer just supplying gas from Norwegian fields, but from Russian fields as well. Stringent requirements enforced by environmental organisations in Norway in relation to zero emissions resulted in the development of the fields having a negligible impact on the environment without any serious conflict with the fishing industry. The oil and gas industry became central in resolving problems associated with unlawful fishing and unaccounted for transhipments in the Barents Sea. New tracking systems and systems aimed at ensuring a state of readiness when emergency situations arise, and also closer co-operation between Norway and Russia, have played a decisive role. Co-operation became easier once Russia became a member of the WTO in 2009, and Putin’s advisers aligned Russia with the West. The management of fishing in the Barents Sea remained an example of international co-operation in this sphere. Paying greater attention to the northern regions assisted in achieving success in the fight against pollution, this pollution being a source of toxic substances in the Arctic. Norway’s decision to grant the UN 20% of its net income from the extraction of oil and gas beyond the 200-mile zone also increased the effectiveness of this work. At the same time, we were receiving more and more reports about the possible emergence of new species in the Barents Sea.
With the increase in oil consumption, the unrelenting force of the greenhouse gas effect continued. Despite the purchase of quotas for emissions of carbon dioxide into the atmosphere and investment in the treatment of СО2, Norway was unable to fulfil the requirements set out in the agreement for ratifying the Kyoto protocol. However, climate change did not provoke particular concern. The increase in the population’s prosperity led to a greater degree of individualisation. Due to the fact that the climate became more changeable and humid, every person had to take steps to improve their own personal safety. One advantage of warming up was that new regions in the Arctic became accessible for exploratory work and field development. As before, a mood of gold fever prevailed.
Scenario 2: Trains to the East
The high level of economic growth in Asia slumped in 2011. China’s efforts to combine a party dictatorship with a market economy resulted in an uprising by peasants and protests. This large country was in danger of disintegrating. This led to a slump in the global economy which continued over the next decade. Foreign investors withdrew from this region, preferring to work in other Asian countries and Eastern Europe. The growth in energy demand was below the suggested level. On the other hand, forecasts regarding the demand for oil had to be scaled down. The rise of Islamic fundamentalism led to the Middle East, Central Asia and North Africa becoming explosive regions. Oil extraction units and oil pipelines supplying “non-Muslim” raw materials became priority targets for terrorist acts. Following the United States’ departure from Iraq, the region became even more restless. In this connection, oil and gas prices remained at sufficiently high levels.
In the Norwegian sector of the Barents Sea, no oil or gas reserves on a large scale had been discovered. Many indicators point to the fact that the majority of the oil and gas reserves had long since been exhausted. However, development of the fields discovered proved to be economically inexpedient. Only the “Belosnezhka” and “Goliat” fields have been opened up. Additional volumes have been extracted in the North Sea, where a good infrastructure exists, while the Norwegian oil producing companies work in other countries. Norway, like Great Britain, is losing its position as an oil supplier. Russia, on the other hand, is on the up and up. It has the largest gas fields in the world and all the powers that be in the Kremlin are striving to obtain authorisations to participate in development. Russia has concluded agreements regarding new supplies in every part of the globe: Western Europe, the USA, China and Japan. Work is continuing on the active development of new fields on Sakhalin, in Siberia and the North European regions. Construction of the pipeline along the bottom of the Baltic Sea was completed in 2010 and, as a result, it was extended through Finland as far as the Barents Sea. At the same time, volumes transported by sea increased from 20 million tonnes in 2005 to 250 million tonnes in 2025. The Shtokman field provided large supplies of liquefied gas to the USA.
The “Statoil” and “Norsk Hydro” companies participated in the development of fields in this region. In turn, Gazprom gained control over some of the companies and their licences to develop mineral resources and, in 2009, initiated their merger. Russian oil-producing companies came under the control of the State which, by utilising oil and gas fields, is endeavouring to re-establish the country’s lofty status. The policy of exerting direct pressure by limiting access to gas reserves, following its negative experience with Ukraine, was acknowledged as being ineffective. Instead of this, the emphasis was on obtaining control over the pipelines and oil refineries in neighbouring countries. Russia strengthened its position on the market and international forums. Several of these proposed that while Norway may establish its environmental standards in the Barents Sea, Russia is setting the conditions, and not just in the oil and gas sector. The Northern fleet was modernised and Russia gradually set about increasing its presence in the region of the Spitsbergen archipelago and the adjacent area of the Barents Sea. Norway was left without support. No one decided to speak out against the authorities in the Kremlin. The dependence on energy resources remained overly high, while there was more and more interest in using the northern route. Unlawful fishing in the Barents Sea increased appreciably. In protest, Norway opted out of its agreement with Russia on co-operation in the sphere of fishing, but did not derive any benefit from doing so. The International Council for the Exploration of the Sea declared back in 2010 that stocks of cod were below safe biological limits. Environmental organisations and consumers initiated a boycott of all cod products caught in the north-east Atlantic.
The optimism surrounding oil disappeared quite quickly in North Norway. Enterprises which decided to adapt to the new conditions encountered a myriad of problems. The network of suppliers which had been created moved to the east to participate in the development of Russian fields. No miracles transpired with regard to sea fishing. Fishing using conventional implements decreased from year to year, while other competing countries took over leadership in the sphere of fishing. Norway’s image was weakened because more and more new facts about sea pollution had come to the attention of the public, along with unlawful fishing, poisoned fodder and nutritional products dangerous to the health of individuals. To lower the danger caused by transporting Russian oil, the tanker routes were removed beyond the boundary of territorial waters. A large-scale accident which took place in the Porsanger Fjord in 2013 demonstrated that emergency services were unable to deal with large oil spills. The population continued to migrate away from the north of the country. This migration was aggravated by public sector cutbacks which the State was forced to introduce following a drop in revenue from the oil and gas sector. In 2025, the Russian influence on the Norwegian economy and social living became tangible, especially in the north of the country. Kirkenes became a mini Murmansk. The town was unofficially referred to as such way before this. This was also noted in the corruption perception index in “Transparency International”, which stated that Norway had fallen to 32nd place by the year 2018.
Environmental problems were no longer accorded the same level of attention as before. Many parties believed that they had been dreamt up by scientists in order to ensure financing for scientific work. The country’s main task was to restore economic growth. International unrest which came about following the revolution in China made it more difficult to legislate the circumstances under international agreements. Once Russia was able to establish control over fishing, stocks of cod started to increase from 2020 and most of these stocks were distributed across the Russian zone due to the fact that the seas were warming up. Russia occupied a leading position in all directions.
Scenario 3: Transition
Once Bush left office as President of the United States, the uncompromising policy with regard to Islamic States underwent serious change. Normalisation of the situation in Iraq led to democracy and reconciliation across the rest of the Middle East. Countries were able to break away from the vicious circle of poverty, oppression and despair. International prices for energy resources fell. Shortly after, however, it became clear that calculations of the resources available were overly optimistic. Many fields were depleted and drop offs in productivity occurred much more quickly than had been suggested. This resulted in a significant amount of profiteering and price jumps, which created a growing amount of unpredictability for the world economy as a whole.
This economic uncertainty was also linked to a growing number of economic disasters. Over a period of three decades, China’s economy had grown at such a rate that no other country was able to keep up. China and India clashed, with growing ecological problems, the disappearance of forests and soil erosion. Many towns became unfit to live in. After calculating the environmental damage, it became clear that, in reality, economic growth was negative. The political elite gradually came to the understanding that the course chosen had taken the country to the edge of a precipice. Another model of economic growth was needed. China introduced a “Green State report” back in 2010. To our great surprise, the major industrial countries became the principal leaders in the sphere of applying renewable resources and the implementation of strict international agreements concerned with the climate and the environment. This had repercussions in Japan and Europe, where drought, the problem of drinking water and extreme weather conditions convinced the population of the need for a new policy. Even in the USA, where 5% of the world’s population accounts for 25% of energy consumption, there was a distinct change in mood. The country joined the Agreement concerning ratification of the Kyoto Protocol and, in 2013, more ambitious targets were set than in the 1997 protocol. After this, a mass reorganisation took place in favour of increased energy resource efficiency and the utilisation of renewable sources of energy, which was stimulated by high duties on carbon dioxide emissions and the financing of new technological developments.
Norway and Russia were effecting reasonable investment in the development of fields on the bottom of the Barents Sea. Both parties concluded an agreement regarding the demarcation of the Barents Sea in 2008. In addition, an agreement was also concluded on co-operation as regards resource utilisation in this area of the sea, based on joint environmental standards. Vulnerable regions were subject to protection by stipulating areas which were to be free from any oil and gas activity. However, many years lapsed between locating the field and the start of the commercial extraction of resources. In connection with this, the implementation of plans for developing fields made it necessary to replace the existing management plan with one that was more geared to the environment. Norway and Russia were among the greatest opponents of international resolutions to limit atmospheric pollutants. In both countries, the oil and gas sector was of key importance and the oil lobby had significant influence. Nevertheless, several concessions were made under the pressure of international interests in order to avoid being branded guilty of causing climate deterioration. Norway is using finance amassed from the sale of oil and the experience acquired from operating hydroelectric power stations and developing oil and gas fields to create and develop alternative sources of energy as a separate branch of the energy industry. At Norway’s initiative, the implementation of a large-scale international programme for improving energy efficiency in Russia was started. The allocation of investment support for energy requirements was gradually discontinued, while a significant amount of investment was put into energy-saving measures, pipeline leaks were eliminated and Russia’s oil and gas consumption dropped by 25%. In connection with this, the country was able to increase its supplies of oil and gas to Europe without having to open up new fields. The measures taken facilitated a significant reduction in pollution levels, allowing Russia to earn billions on the quotas market for atmospheric emissions.
Despite the fact that, at an international level, there was a significant decrease in atmospheric emissions, the impact on the climate continued as a result of air pollution over preceding periods. Nevertheless, the future looked brighter. In the Report on the state of the environment in the Arctic region, which was presented in 2025, mention was made of the fact that the increase in temperature by 2010 was only 2-4%. The thawing of ice and icebergs happened on a smaller scale, which reduced the probability of walruses and Polar bears becoming extinct. At the same time, the report also mentioned the fact that low economic growth and cleaner technologies had allowed a reduction in pollution in the Arctic, even though the “self-cleaning” of the ecosystem will take a certain amount of time.
Conclusion
The scenarios put forward show three different development possibilities by 2025. We are not pointing out which of these is the most likely or the most desirable. The task set lay in illustrating several of the many directions which development would take. Other possible development scenarios could have been put forward, for instance, those where fossil energy sources were replaced by nuclear energy, or where the struggle for raw materials and access to energy sources resulted in a battle for resources and high political tension in the Barents Sea region. The element uniting all of the scenarios is that the most important driving force is located far beyond the boundaries of the region under consideration, and hence is beyond our control.
Peter Aarbo is an assistant professor at the Norwegian College of fishery Science at the University of Tromsш.
Gunnar Sander is an advisor at the Norwegian Polar Institute
This article was published in OTTAR2/2006. Ottar is the journal of the University Museum of the University in Tromsш, Norway. Bellona has been allowed to reprint.
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