Norway’s oil industry is in full recovery mode, but the country’s top petroleum lobbyist is worried about growing opposition ahead.
At the same time as it gave a big boost to investment forecasts for next five years, Norwegian Oil and Gas Association sounded one of its starkest warnings yet on political risk facing the nation’s biggest industry. Explorers and producers are finding themselves in the midst of an increasingly heated debate in Norway on the future of fossil fuels, with calls for cuts to incentives, more drilling restrictions and higher taxes.
While Norway’s oil industry is tightly regulated, one of its main selling points has always been a stable framework with support across the political spectrum. That means that investment forecasts could be hit “dramatically” if that is looking shaky, Karl Eirik Schjott-Pedersen, the association’s chief executive, said. “I’m raising a flag to say that these investments are vulnerable if such a situation arises,” Schjott-Pedersen, who represents firms including Equinor and Royal Dutch Shell, said in an interview. “It’s important for us to stress that this debate and these proposals for change aren’t cost-free.”
With the share of locked-in spending falling to 60 percent in 2023 from 92 percent in 2019, investment could drop sharply and make this year’s recovery brief, Schjott-Pedersen said.
Political risk is even a bigger concern than the market, where crude prices have tumbled by about 30 percent over the past three months, he said. After the industry cut costs drastically during the downturn from 2014 to 2017, projects are less vulnerable to Brent crude in the $50s than to tax hikes, Schjott-Pedersen said.
The warnings from the former Finance Minister comes as two centrist parties involved in negotiations to bro-aden Norway’s Conservati- ve-led government have signalled they will seek tougher restrictions on oil industry.