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Coalition slows Norway’s oil and gas development Minority Socialist Left Party opposes Barents, Lofoten developments; now holds reins at finance, enviro ministries; could lose Arctic lead Alan Bailey Petroleum News
The election of a coalition of left-leaning political parties in Norway’s national election in September may lead to a slowdown in that country’s oil and gas industry, according to a recent Dow Jones Newswires article. Norway is the third largest oil exporter in the world.
The country’s new environment minister, Helen Bjornoy, has forced a delay in awarding some oil and gas blocks in the Barents Sea and has suggested denial of development approval for the 250 million barrel Goliat oil field in the Barents, according to the report. The delayed blocks lie between the Goliat field and the 200 billion cubic meter Snohvit natural gas field, Dow Jones reported. SV party Bjornoy is a member of Norway’s Socialist Left Party, or SV, the junior partner in a coalition led by the country’s Labor Party. SV’s election campaign included a commitment to halt oil and gas development in environmentally sensitive areas such as the Barents Sea and the area around the Lofoten Islands. In addition to raising environmental concerns, the party wants to see Norway developing industry sectors other than the oil and gas business that has come to dominate the country’s economy, according to the Dow Jones article.
According to a story in the Scandinavian Oil and Gas Magazine, published prior to the 2005 election, SV wants to see oil gas investment focus on areas that have already been involved in development, rather than opening up “new and vulnerable areas.”
SV controls Norway’s finance ministry as well as the environmental ministry — the party’s leader, Kristin Halvorsen, has become Norway’s finance minister. Halvorsen was reported in the Dow Jones story as saying “We need to balance out development of industries ... to have several legs to stand on in addition to the oil and gas industry. ... We have a lot of opportunities in the environmental field” — such as renewable energy and carbon dioxide technology — “and great opportunities for tourism.” Compromise likely But the Labor Party supports exploration and development. So it is unlikely that SV can completely block new oil and gas initiatives, although Labor may have to compromise on a management plan for future Norwegian oil and gas development. That compromise could slow down development — Bjornoy’s management plan for northern Norway will include a timetable for when or if areas such as the Barents Sea will open for petroleum development.
However, a quarter of Norway’s revenue comes from a petroleum industry that also drives half of the country’s manufacturing industry, according to the Dow Jones story.
“The tax coming from oil and gas fields is the most important revenue for the state budget,” Per-Kristian Foss, former finance minister and a member of the Right opposition party, is reported as saying.
And Tor Steig, chief economist for the Confederation of Norwegian Business and Industry, reportedly said that it isn’t realistic for Norway to focus on tourism, as an alternative to oil and gas.
“It’s not possible,” he said. “The wage level is far too high to build a big tourism industry.” Negative signals Helge Lund, chief executive of Statoil ASA, reportedly said that stopping developments such as Goliat would send a strong negative signal to oil and gas companies interested in investing in Norway. And, although Goliat itself only accounts for less than 1 percent of Norway’s remaining reserves, failure to find and develop new sources of oil and gas could accelerate the decline in Norwegian oil and gas output to 70 percent in the next 10 years, the oil industry has warned. New development could slow that decline to between 20 percent and 40 percent.
Lund said that Norway could lose out in future exploration.
“When there are open industrial opportunities, we as an industry have to take those opportunities,” Lund said. “If we are not doing it, others will. ... That’s why I think it’s not an applicable policy for Norway to just opt for a delaying policy.”
Erik Bruce, Nordea Markets chief economist, said that a slowdown in the pace of oil and gas development would impact Norway’s 3.5 percent annual growth. Bruce was reported as saying that “at the moment we’re in a very positive environment” for shipyards, technology, drilling and manufacturing. “But if oil investment turns down, then they are going to be in big trouble.”
The oil industry and members of the former conservative government have also argued that a slow down in the oil industry could damage Norway’s leading edge in offshore development, engineering and technology.
Opening up the Barents “is a terrific opportunity for Norwegian industry to further strengthen its position as the leading Arctic industry cluster,” Lund said.
And Russia’s OAO Gazprom has recently shortlisted Norwegian companies Statoil and Norsk Hydro for the development of the huge Shtokman gas field in the Russian sector of the Barents.
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