Can Norway dump $35 billion in oil and gas investments, and simultaneously convince that same industry to throw money into the country’s own fossil-fuel future?
Such doubts are the last thing the country’s offshore industry needs. It’s just suffered through a three-year slump, and is struggling with public opinion as it faces an historic lawsuit to stop its expansion in the Arctic. After more than 40 years of pumping oil, Norway is also in need of new investments to replenish reserves just as many of the big global oil companies are looking for the exit.
“This is just one of several negative news stories that are piling up — that’s probably what made me shake my head at the beginning,” Frode Alfheim, the head of Industry Energy, Norway’s biggest oil union, said in a phone interview on Friday. “But I both hope and believe that this isn’t something that will impair international investors’ desire to invest on the Norwegian shelf.”
The proposal needs approval from Norway’s government and possibly even Parliament. Crucially, it has no bearing on the terms offered to oil companies operating offshore Norway, said both Industry Energy and the Norwegian Oil and Gas Association, a lobby group for companies such as Royal Dutch Shell Plc, Total SA and Exxon Mobil Corp. — all companies that could be dropped by Norway’s wealth fund if the proposal is implemented.
The country’s powerful oil lobby chose to look on the bright side, confident the government won’t take any direct steps that would harm an industry that still provides about 15 percent of economic output.
The measures “seem a lot more reasonable than suggestions from the environmental movement that Norway should reduce this risk by reducing oil activity in Norway,” Karl Eirik Schjott-Pedersen, the head of the lobby, said in an email. “That would lead to the loss of thousands of jobs and huge tax income for Norway.”
Some opposition parties and environmental groups such as Greenpeace — one of those suing the government to fight exploration in the Arctic Barents Sea — argue Norway should curb incentives for the oil industry, such as a cash refund for the tax value of exploration expenses. What to do with Norway’s oil industry became one of the biggest issues of the campaign ahead of the general election in September, with voters debating the financial risk and moral aspects of further exploration.
But opponents of drilling made limited gains in the election, and union leader Alfheim, who represents almost 20,000 workers in the offshore industry, said he remained confident that the biggest political parties — the Conservative and Progress parties in government and Labor in opposition — will safeguard a consensus surrounding stable terms for oil companies.
The energy policies from the government, which has been supportive of the industry, are what oil companies will base their decisions on — not the central bank’s view on crude prices, said Jarand Rystad, who heads the Oslo-based consultancy Rystad Energy AS. “I don’t think anyone investing in oil sees Norges Bank as holding the absolute truth,” he said.
Norwegian Labor Party leader, Jonas Gahr Store, welcomed the current debate, saying in an interview on Friday that it’s not climate related but has to do with “financial risk.” The biggest opposition party will now study the plan before deciding, he said.
Government policy on its 67 percent ownership in Statoil ASA, the dominant oil and gas producer in Norway, also remains firm, the Petroleum and Energy Ministry said in an email. Statoil itself declined to comment.
Alfheim still urged politicians to be careful in reviewing the central bank’s proposal.
“We mustn’t get a result that creates doubts about the future of the Norwegian shelf,” he said. “Framework conditions will remain stable, the state will keep investing both in exploration and development: these are the most important signals to give to international companies and investors.”