Oil still in the future

Norway will keep drilling, as wealth fund increases

Photo: Marit Hommedal/NTB
Despite environmental concerns and criticism from abroad, Norway will continue exploring and drilling for oil for the foreseeable future.

THE LOCAL

Norway, Western Europe’s biggest oil producer, plans to continue its oil exploration and drilling in the coming decades, the government said on June 11, despite warnings from the International Energy Agency (IEA).

In a white book on its energy future, Oslo said it wanted to “extend the current practice with regular concession cycles on the Norwegian continental shelf to give the industry access to new prospecting zones.”

“We will supply energy to the world as long as the demand exists,” Oil and Energy Minister Tina Bru told a press conference.

“The government will therefore maintain an oil policy that facilitates profitable oil and gas production in the framework of the Norwegian climate policy and our climate goals,” she said.

Norway aims to reduce its greenhouse gas emissions by between 50% and 55% by 2030 and to almost nothing by 2050.

But Norway is regularly criticized for the CO2 emissions generated abroad by the oil it exports.

This week, Norway launched a call for applications for a new licensing round in new offshore zones.

The Norwegian position contrasts sharply with that of the IEA, which recently warned that all future fossil fuel projects must be scrapped if the world is to reach net-zero carbon emissions by 2050.

International observers have criticized the Norwegian position.

The Norwegian government and industry cannot ignore science,” said Sandrine Dixson-Decleve, co-president of international think tank The Club of Rome. “We look to Norway for leadership and ambition on the energy transition—not complacency and backtracking,” she said in a statement.

Meanwhile, the head of climate and energy issues at the World Wildlife Fund, Manuel Pulgar-Vidal, said that “by standing on the side of fossil fuel interests, Norway risks having stranded assets.”

“Norway’s position will increase the risk of the world reaching fragile climate tipping points, which in turn will cause devastating impacts on the natural world on which we depend,” he said.

In 2018, Norway was the world’s 14th biggest producer of oil and eighth biggest producer of natural gas, according to the latest figures from the U.S. Energy Information Administration.

Wealth fund increases in first quarter

Norway’s sovereign wealth fund, the world’s largest, gained some NOK 380 billion in the first quarter, boosted by stock market investments. The massive fund was worth a total of NOK 11 trillion at the end of March. In the first quarter, it posted a 4% return, driven by its equity investments, which account for 73.1% of its portfolio, showing a rise of 6.6%.

“The rise of the equity market was to a great extent driven by the finance and energy sector,” Trond Grande, the fund’s second in command, said in a statement.

The fund also made gains on its real estate investments, which account for 2.5% of its assets and were up 1.4%, while its fixed-income investments (nearly a quarter of the portfolio) suffered a 3.2%  loss.

At the same time, the government dipped into its piggy bank to the tune of NOK 83 billion to balance its budget.

Oil wealth tapped to offset negative impact of pandemic

Norway will spend billions of dollars more than planned from its oil revenues to mitigate the impact of the pandemic, the government announced on June 8, as elections loom in September.

In an amended draft finance bill, the government said it plans to spend a record NOK 402.6 billion of its oil revenues, which normally go into its sovereign wealth fund. That is almost NOK 90 billion more than was planned in the original draft budget presented in October.

“Extraordinary economic support measures related to the pandemic account for a large bulk of the increase,” Norway’s ministry of finance said in a statement.

Normally, the government can draw up to 3% of the fund’s value to finance its spending, but the extra boost to the economy announced on Tuesday means that this figure will rise to 3.7% this year.

“The pandemic still weighs on the Norwegian economy,” the ministry said. Since the government only controls a minority in parliament the budget bill still needs to be negotiated with opposition parties.

This article originally appeared in the June 18, 2021, issue of The Norwegian American. To subscribe, visit SUBSCRIBE or call us at (206) 784-4617.