Upstream Activities of Energy Intensive Projects

Does Government support benefit Arctic Communities?

- Indications from energy intensive industry in rural Iceland

2013 Arctic Energy Summit, October 8th-10th, 2013Akureyri, Iceland

Hjalti Jóhannesson, Researcher and Assistant Director University of Akureyri Research Centre

„Upstream activities“Wikipedia definition

• „The upstream sector includes the searching for potential underground or underwater crude oil and natural gas fields, drilling of exploratory wells, and subsequently drilling and operating the wells that recover and bring the crude oil and/or raw natural gas to the surface.”

Upstream activities inhydro- and geothermal energy?

• Researching– Energy potential of glacial rivers

and geothermal fields• Orkustofnun (e. National Energy

Authority)• In 2003 Orkustofnun‘s

GeoScience Division was transferred into a self-financed, state owned, non-profit institution ÍSOR (e. Iceland Geosurvey)

• Harnessing - and researching– Landsvirkjun (a state owned

power company) processes 75% of all electricity used in Iceland

A long history of research and planning

Kárahnjúkar (or similar project) had been prepared since the 1960s

A recent megaproject in east Iceland

• Kárahnjúkar hydro power plant: 690 MW / 4,600 GWh– Owned by Landsvirkjun– Highly automated, 13 local

jobs needed to operate– Operation period since 2007

• Alcoa-Fjarðaál aluminium plant: – 350,000 tons of aluminium

annually– Some 500 direct jobs and a

total of estimated 900-950 jobs

– Operation period since 2007

Monitoring the megaprojects 2004 - 2010

Kárahnjúkar hydropower project

Alcoa aluminum plant

Celebration! March 2003

Reyðarfjörður; a fishing village of some 600 was converted into a manufacturing town

Why government emphasis on this type of development?

• Utilization of Iceland´s domestic/renewable energy sources

• Regional development– 200,000 of 320,000

inhabitants live in the capital region

– Other regions generally sparsely populated

0-45-9

10-1415-1920-2425-2930-3435-3940-4445-4950-5455-5960-6465-6970-7475-7980-8485-8990-9495-99100 +

-6% -4% -2% 0% 2% 4% 6%

Females impact area Males impact areaFemales Iceland Males Iceland

Age

Male Female

East Iceland following a well-known path

• Out-migration• Uneven age- and gender

structure

• Low income• Low housing price• Diversity of jobs limited

• Infrastructure limited• Service base weak

• Slower pace of life

(East Iceland, Dec. 2002)

Population development

2002-2008 2002-2009 2002-2011Central area 1,687 1,274 1115Northern area -484 -558 -595Southern area -334 -360 -332Research area total 869 356 188

2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

3,09

7

3,05

5

2,95

3

2,87

9

2,89

3

2,78

8

2,76

3

2,73

7

2,76

9

2,76

5

7,75

8

7,96

0

8,61

3

9,98

1

11,7

45

10,4

12

9,44

5

9,03

2

8,86

7

8,87

3

6,16

6

6,05

6

5,95

8 5,84

0 5,78

5

5,66

5

5,68

2

5,60

8

5,59

3

5,57

1

Southern area Central area Northern area

Some positive lessons

• Population increase• Local economic impacts

– New jobs, higher income, tax base of municipalities

• Optimism and positive local spirit

• Infrastructure improvement • Improvement of services

– More population and income in addition to the aluminium plant itself have increased demand

• Experience and know how– Engineering companies and

Landsvirkjun

Diverse

• Large size of workplace compared to the local labour market– Dominant company– Much impact on the social rhythm

• Work shift pattern (12 hours)– Strain on families

• Decrease of jobs in traditional fields of the economy, fisheries and fish processing– Also part of a general trend

• Male oriented – Gender balance more even than

in other aluminium plants in the country but males are however dominant (75%)

Diverse

• Some spin-off jobs arrived later due to economic crisis

• Staff turnover was relatively high– Work shift pattern, not suitable

jobs, troubles of newcomers adjusting to local community

• Increasing commuting over longer distances– Challenging landscape

Negative • Massive housing bubble• Not right type of housing• Competition among

municipalities– Competed for new inhabitants– Excessive spending in municipal

infrastructure

• Lost opportunities in town planning

• Limited geographical scope of impacts– High hopes raised by proponents

• Short construction time 2004-07– Strain on the community and the

economy