A Quest For Energy In The Globe’s Remote Places

HAMMERFEST, Norway — For a quarter-century, energy executives were tantalized by vast quantities of natural gas in one of the worlds least hospitable places — 90 miles off Norways northern coast, beneath the Arctic Ocean.

Bitter winds and frequent snowstorms lash the region. The sun disappears for two months a year. No oil company knew how to operate in such a harsh environment.

But Norway has finally solved the problem. The other day, on an island just offshore, a giant yellow flame illuminated the sky here. It was just a temporary flare for excess gas, but it signaled a new era in energy production.

Across the bay from this small fishing town, where reindeer wander the streets, one of the worlds most advanced natural gas plants is coming to life.

Within weeks, gas will start crossing the ocean in specially designed ships, feeding into the pipeline network for the American East Coast. Before Christmas, furnaces in Brooklyn and stoves in Washington will be burning the gas. It will be the first commercial energy production from waters north of the Arctic Circle.

As global demand soars and prices rise, energy companies are going to the ends of the earth to find new supplies.

In Kazakhstan, petroleum engineers are braving wild temperature swings in the shallow waters of the Caspian Sea to tap the biggest oil discovery of the last 30 years. They are drilling wells six miles deep in the Gulf of Mexico. And on the island of Sakhalin, off far eastern Russia, they have drilled horizontal wells through miles of rock to produce oil from a stretch of ocean notable for giant icebergs.

But as the industry extends its reach, the quest is becoming more arduous. The cost of producing new oil and gas is rising fast, and companies are troubled by worsening delays. Drilling rigs are scarce. Engineers, geologists and petroleum specialists are in critically short supply.

And the politics of oil and gas are getting trickier, with producing countries demanding a bigger share of the revenue and growing angry about project delays that postpone their payments.

Industry executives say their ability to keep up with global demand is badly strained.

Were facing bigger risks and bigger difficulties when we go into new frontier regions, said Odd A. Mosbergvik, a senior manager at the dominant Norwegian energy company, StatoilHydro. But this is why the oil industry is for big boys. Its a big gamble.

The industrys new reach is shifting the economics of energy extraction. According to a recent study, discovery and development costs, a key indicator for the industry, tripled from 1999 to 2006, to nearly $15 a barrel.

Last year alone, companies spent $200 billion developing new energy projects worldwide, according to the study by the consulting firms John S. Herold Inc. and Harrison Lovegrove — an amount larger than the economies of 147 countries.

These higher costs mean that the industry needs higher energy prices to finance new projects. They are also constraining its ability to expand quickly.

There are no easy barrels left, said J. Robinson West, chairman of PFC Energy, an industry consulting firm in Washington. The only barrels are going to be the tough barrels.

There is plenty of oil and gas still in the ground, energy executives say. But global consumption is rising so fast that they must keep looking for new sources. Despite worldwide concern over global warming and the role of fossil fuels in causing it, United States government specialists project that global oil and gas demand will increase by some 50 percent in the next 25 years.

At the same time, the big discoveries of the last three decades, like those in the North Sea and on the North Slope of Alaska, are drying up. This is leading oil companies to remote places like Hammerfest.

The United States will need to import about a fifth of the natural gas it uses by 2030, mostly in a liquefied form shipped across the seas in tankers. Such imports are expected to swell more than sixfold from 2005 to 2030, according to the Energy Information Administration. And consumption is rising fast in the economically booming Asian countries.

Producing oil and gas in polar regions is not entirely new, of course. Russian engineers have been doing it in Siberia for decades, with mixed results, and Alaskas North Slope was long the most important United States oil field.

But those fields are on land. The Norwegian field is the first Arctic project to tap oil and gas reserves far offshore, in water more than 1,000 feet deep, where traditional exploration methods would be too costly.

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