Norway's political storm warnings prove unfounded
The country's election result should quell nerves in the oil and gas sector
Victory for the incumbent right-wing Conservative Party and its allies in Norway's general election provided a degree of relief for the oil industry. Nevertheless, parties keen to restrict the sector's growth could still prove influential during the next four-year term.
The Conservatives, led by Prime Minister Erna Solberg, are regarded as the most pro-oil party of the major players in Norwegian politics. They won 45 seats on 11 September, doing better in the polls than some had forecast—the result gives their centre-right coalition a narrow majority, accounting for 89 seats out of a total of 169 seats. Meanwhile, the main opposition centre-left Labour Party lost ground, both to smaller socialist and centrist parties. It remains the largest single party with 49 seats. The Green Party, which has said it wants to phase out oil and gas development within 15 years won just one seat. That effectively scuppered its chance of holding the balance of power.
But the industry isn't quite out of the woods. The Conservatives still lost three seats in the election and may need the support of two small centre-right parties with lukewarm attitudes to the oil sector to enact legislation. The Liberals, in particular, want to curtail oil and gas exploration in the Norwegian Arctic.
Debate is also likely to rumble on over whether the government should be taking on as much risk in the early phase of oil and gas projects as it has done previously. The fear is that the state could lose out, given the possibility of reduced future revenues should global oil demand fall in coming years, due to the impact of stricter climate change measures. Norway is a world leader in electric vehicle use and has a target of achieving zero emissions from all new cars by 2025.
Coalition deal-making is a complex business in Norway and it could be some time before it becomes clear which parties will support the government and on which issues. However, it seems unlikely that the government of a country heavily dependent on the oil industry for its economic prosperity will want to put extra obstacles in the way of oil and gas development.
The industry already faces threats to its expansion from directions other than politics, as existing fields start to dry up. Recent large discoveries, such as Statoil and Lundin's Johan Svedrup project, now under development, and Statoil's Johan Castberg find in the Barents Sea should help prevent Norwegian hydrocarbons production from declining over the next five to 10 years. But room for a significant increase in overall output looks limited. The long-term outlook is uncertain, as it is for the entire oil province centred on the North Sea.
Solberg has said she expects the oil industry to be Norway's biggest economic sector for the next three decades. That may be true, though perhaps it says more about the way in which the Norwegian economy is dependent on the hydrocarbons industry, than a prediction of better times ahead.
Solberg's government campaigned on the promise of keeping taxes low and has also been reluctant to permit the country's hydrocarbons revenue-fuelled sovereign wealth fund—now worth around $1 trillion and the world's largest—to be tapped extensively for public spending, especially now oil prices are picking up. Norway's politicians will be mindful that one of the world's most prosperous nations needs to be prepared for tough times ahead.