Norway’s oil search on sensitive ground

The hunt for oil and gas that lie beneath the Barents Sea is under threat

BACKING down on drilling off Norway’s Lofoten Islands could also threaten the search for 16 billion barrels of oil and gas that lie beneath the Barents Sea, the country’s energy minister said.

The warning comes amid increasing signs that Labour, the nation’s biggest party and a long friend to the oil industry, is starting to give in to a push to shield the sensitive islands from exploration. Oil companies such as Equinor have said access to the area, thought to hold about 1.3 billion barrels of oil and gas, is vital to prolonging Norway’s oil industry.

“If the environmentalists win this one, the focus will quickly move to the Barents Sea,” Petroleum and Energy Minister Terje Soviknes, who represents the Progress Party in the Conservative-led government, said in an interview on Friday.

Drilling off Lofoten Islands has been one of the most deadlocked issues for years as political bargaining maintained a ban on exploration. If Labour flips on the issue, there would be a solid majority in parliament for closing off the islands permanently.

Compromising with smaller parties, successive governments have kept the area off limits, while expanding exploration in the Barents Sea. Success in the under-explored Barents is seen as key to limiting a forecast drop in production from the middle of the next decade. Yet the recent search for resources there has been disappointing.

That adds to the importance of keeping the door open to the Lofoten Islands, Soviknes said. Norway’s supplier industry depended on new exploration and developments to keep thriving, he said.

The growing doubts about which way Labour will go is now hurting Norway’s attractiveness as an oil producer, Soviknes said.

“They’re slipping in the Lofoten Islands issue, and it’s being perceived as if they’re sliding in their entire oil policy,” he said. “That rocks what has perhaps been the most important competitive advantage for the Norwegian oil industry: that we’ve had stable framework conditions, regardless of political changes.”

The industry just weathered a deep crisis in 2014 to 2017 because of a crash in oil prices, and the Lofoten Islands issue could be the next big challenge, Soviknes said.

Norwegian media have reported that a majority of local Labour groups in the Lofoten Islands area now oppose an impact study, which is the first step needed to start exploration. The issue could come up at Labour’s congress next year, where the matter could come to a head.

But Labour’s top echelon, which has close ties to the powerful oil worker unions, rejected the minister’s criticism.

The party remained firmly in favour of exploring the Barents Sea, said Espen Barth Eide, the party’s spokesperson on energy policy. Talk about the Lofoten had little impact as long as the biggest parties – Labour and Progress included – have to keep smaller parties happy by keeping the islands off limits, he said. – Bloomberg