Norway may turn its back on offshore oil exploration

Western Europe’s biggest oil producer is, seemingly, falling out of love with oil.

Norway may turn its back on offshore oil exploration

Western Europe’s biggest oil producer is, seemingly, falling out of love with oil.

To the dismay of the nation’s powerful oil industry and its worker unions, Norway’s opposition Labour Party has decided to withdraw its support for oil exploration offshore of the sensitive Lofoten Islands in Norway’s Arctic, creating a solid majority in parliament to keep the area off limits for drilling.

The dramatic shift by Norway’s biggest party is a significant blow to the support the oil industry has enjoyed, and could signal that the Scandinavian nation is coming closer to the end of an era that made it one of the world’s most affluent.

Oil companies led by state-controlled Equinor, the biggest Norwegian producer, have said that gaining access to Lofoten is key if the country wants to maintain production as resources are being depleted.

Estimates suggest that there could be 1bn-to-3bn barrels off the archipelago, which is also considered a natural wonder.

“The whole industry is surprised and disappointed,” said Karl Eirik Schjott-Pedersen, head of the Norwegian Oil and Gas Association. “It doesn’t provide the predictability we depend on.”

Yet, Labour’s decision wasn’t a big surprise. Norwegians are starting to question their biggest export and source of wealth amid growing concerns over climate change. Even some oil executives had already given up on Lofoten, which has been kept off limits for years, thanks to political compromises.

However, the battle will now likely move on to whether drilling should continue in the Barents Sea.

The oil industry also fears that Labour now could be willing — or forced — to compromise on other issues the next time it takes the reins of government, such as petroleum taxes and an attractive exploration refund for companies that aren’t profitable.

Labour leader Jonas Gahr Store said his party will continue to be a supporter of the oil industry and to back the existing tax system.

Yet, Mr Gahr last week also said he wants oil companies in Norway to commit to a deadline for making operations completely emissions free, an ambition the country’s top oil lobbyist called “very demanding”.

Norway’s biggest oil union, Industry Energy, a long-time ally of Labour, lashed out at the party’s new stance on Lofoten, which was adopted less than two years after an internal party compromise on the issue.

“It creates imbalances in the policy discussions for an industry that’s dependent on a long-term perspective and we can’t accept that,” said Frode Alfheim, the union’s leader.

- Bloomberg

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