Related Articles
Forward article link
Share PDF with colleagues

Norway leans greener

Public enthusiasm for the oil and gas industry is on the wane, with potentially significant effects

This author's impression, after almost 20 years covering the oil and gas industry, including two-and-a-half years spent living and working in Oslo, was that the Norwegian public and their politicians had a generally positive and supportive view of their hydrocarbons sector.

But the policy positions being staked out by an increasing number of the country's political parties, and by current polling numbers, point to a perceptible shift in attitudes, particularly among younger voters and activists. And this shift comes when the Norwegian oil and gas sector may need more support, rather than less.

Two issues loom largethe first, opening for drilling the waters around northern Norway's iconic Lofoten Islands, which represent the most prospective under-explored areas for new discoveries; and the second, a Norwegian petroleum tax system less favourable towards explorers and producers.

The three largest parties in the Norwegian parliament, the Stortingthe right-leaning Conservative and Progress parties and the centre-left Labour party, with a combined share of the 2017 electoral vote of over 65.5pc and between them 121 seatshave all long supported some opening of the northern waters around Lofoten.

But, despite this majority support, any prospect of legislation is stymied by various junior coalition partners, who stake out more pro-environment positions. And, perhaps based on a perception that the appetite for greener policies among the electorate is growing, the confidence of these centrist parties in their less oil-industry-friendly positions seems to be growing.

The most obviously environmentally focused centrists, the centre-left Green Party, may once have been "a laughing stock, with inexperienced politicians and utopian ideas", but "they are getting better and more professional", says Astrid Meland, a commentator at Norwegian newspaper VG.

The latest polls in the region around the capital Oslo put the Greens as the third-largest party there, which, following on from a positive 2017 result, is a "real breakthrough" and will have an impact nationally, says Eirik Lokke from liberal think tank Civita [EL1] .

Leftist support rising

The Greens' target is to hit 4pc of the vote in the next general election, due to be held in 2021. That threshold would entitle it to more MPsunder Norway's proportional representation system, it has just one representative from its 3.2pc of the 2017 vote, while the Christian Democrats have eight from their 4.2pc share- but also more funding and generally greater recognition of its role in the public debate, says Lokke.

But building on this momentum could be hampered by increasing support for other leftist parties that impinge on the Greens' electoral constituency, he warns. The Socialist Left and Communist parties are between them capturing as much as 15pc of the vote in opinion polls, compared to a combined 8.4pc in 2017. Neither is a staunch ally of the oil and gas industry.

The 4pc threshold is also exercising the centrist Christian Democrats and Liberals, the junior partners in a ruling coalition with the Conservative and Progress parties. Both face an "uphill struggle" to get from their current polling numbers to 4pc, says Lokke.

The Conservatives at least may be sympathetic to their current allies' electoral predicament, given that, in Lokke's view, there may have been tactical voting by Conservative voters to ensure that the Liberalsmore natural coalition partners than some other optionsreached 4pc last time round. And a current environmental controversy may mean that the Liberals and Christian Democrats will be looking for a win to bolster their green credentials.

In February, a copper mine in northern Norway was given approval to dump tailings at sea. While the junior partners oppose new industrial projects in the far north, their government contract requires them not to block projects that already have permits. "But the average voter struggles to recognise that difference," says Lokke.

Uplift allowance debate

The petroleum tax system and, in particular, the uplift allowanceintended to compensate producers for the net present value (NPV) lost as a result of depreciating capital costs over six years for tax purposes, and currently set at 20.8pc across four yearscould become a focus of the centrist coalition partners' desire to burnish their legitimacy on environmental matters.

Indeed, the Christian Democrats, who only officially joined the government in January, initially floated reducing the uplift allowance as a condition of its entry, only to be slapped down by the senior partners. The Progress party, conscious of its own declining poll numbers, could well prove unwilling to agree to any green concessions to prop up the Christian Democrats and Liberals, says Lokke. Progress leader Siv Jensen "has said many times that 'every drop of oil' will be produced," says VG's Meland.

There is also a faction within Norway's finance ministry arguing that the uplift allowance should be lowered as it is too generous to oil companies and does not comply with the intention to be tax neutral. However, this argument is "purely theoretical, no oil company uses a risk-free rate" to calculate the NPV lost as a result of depreciation, says Bard Bjerkholt, a journalist at Norway's DN newspaper.

The attitude of Labour, the Storting's largest single party, could be key to any future petroleum tax system debate. It cut the uplift allowance rate from 30pc to 22pc while it was in power in 2013, part of a "fairly reasonable and … baby-steps" approach to oil policymaking that the major parties on both sides of the left/right divide usually take, says Meland.

But Espen Barth Eide, a former Labour minister and a member of the Storting's energy committee, also joined the call for a further uplift allowance reduction, only for party leader Jonas Gahr Store to swiftly disavow such views. The party may be playing a clever game, says Meland. Labour, like many of Europe's centre-left parties, straddles, at times uncomfortably, a divide between its urban, liberal, often younger voterswho may have agreed with Eideand its traditional working-class constituency, more likely to share Store's publicly stated view (he is thought to be privately more sympathetic to Eide).

Youth to the fore

The attitudes of the parties' youth wings, which play a prominent role in Norwegian political society, point strongly towards a more environmentally conscious, oil-sceptical view among younger voters. Meland estimates that only the youth wings of the Conservative and Progress parties favour continuing to drill for oil, with all others opposed. And, at its latest conference, even the Conservative youth wing debated a motion ruling out drilling offshore Lofoten, only to have it voted down, says Lokke.

The hardening of public opinion comes at a challenging time for the Norwegian oil and gas industry. With notable exceptions such as Johan Sverdrup, the size of new discoveries is falling, making it less attractive in a competitive global market for exploration dollars.

Moreover, the US shale revolution promises access to highly prospective acreage in a relatively fiscally stable environment with low political riskin short stealing the clothes that Norway wore in a pre-shale world.

Norway's increasingly environmentally motivated parties and voters fail to consider these global conditions, where the country might logically be looking at making the most prospective areas more available for drilling and fiscal terms sweeter rather than harsher. Part of it may be a lack of understanding. "There are not many oil exports in the Storting," says DN's Bjerkholt. "There is a lack of industry expertise in general; a lot of MPs come from the public sector or are professional politicians."

And elements of the Norwegian public are unwilling to face up to their domestic macro-economic dichotomy, never mind the nuances of licensing or fiscal policy. "They struggle to connect the two, the generous welfare state and the oil industry," says Bjerkholt. "They think they can have the welfare and not the oil."

"They do not try to understand how dependent the welfare state's sustainability is on the oil industry," agrees Lokke. State-controlled Equinor's recent end-of-year results attracted media attention mainly due to the headline profit figure, he says, driving a narrative that the oil industry is in a good place and is, if anything, making too much money, rhetoric that Norwegian public intellectuals have been pushing in recent years.

It is perhaps a dangerous time for such complacency. But Meland strikes a more pragmatic note. "In this spoiled, rich country, most people are not prepared to see cuts" in welfare, she says. "I do not think that, in the end, people will be willing to close down profitable oil fields before [the end of their economic life]. They will take a view that, if others like the Saudis and Russians continue pumping, it will not appreciably cut CO 2 emissions anyway, and rationalise it that way."

Also in this section
Libyan production languishes under ‘illegal blockade’
4 August 2020
National Oil Corporation reports its lowest production since the blockade started in January as external forces gear up for clash over Sirte basin oilfields
Turkey’s ambitions have imperial echoes
4 August 2020
Facing the challenge of a domestic economic crisis, President Recep Tayyip Erdogan hopes that successful military interventions in the surrounding region will foster nationalist solidarity
Bolivian election delay further dampens gas investment appetite
31 July 2020
The Andean country’s natural gas sector will be a casualty of a second vote being pushed back yet again