Norwegian oil hits barricades as ally Labor hints at break
OSLO (Bloomberg) -- For establishment politicians in Norway, discussing changes to the country’s oil policies is akin to swearing in church.
That’s what happened this week, when the Labor Party’s top energy lawmaker, said he was open to debating taxes and incentives for oil companies, including a lucrative exploration cash refund. Labor is the biggest opposition party and the comments carry extra weight because the group is backed by powerful oil worker unions and has been an industry ally since Norway started producing petroleum in the 1970s.
Even if Labor’s Espen Barth Eide, a former foreign minister, later downplayed his comments, saying in an interview that no imminent changes are planned, Norway’s top oil lobbyist called the situation “very serious” and demanded a clarification from the party leadership.
“The oil industry is extremely vulnerable to uncertainty,” said Karl Eirik Schjott-Pedersen, the head of the Norwegian Oil and Gas Association, and also a former Labor Party minister. “Investors aren’t just looking at the current term. Uncertainty about what might come from future governments will also have an impact on their investments.”
Other industry voices, including the head of the Confederation of Norwegian Enterprise and the chief economist of state-controlled oil company Equinor ASA, also denounced the “uncertainty” created by Barth Eide’s comments to daily Klassekampen.
Labor leader Jonas Gahr Store then entered the fray, saying to news agency NTB that the party “supports the current oil tax regime and has no plans to change it.”
That seems to have worked for now. On Friday, the head of the Norwegian Confederation of Trade Unions, the biggest union umbrella group and the key financier of Labor, said he was happy with Store’s clarification. There are “no new signals” from Labor, Hans-Christian Gabrielsen said in a phone interview.
Mounting pressure
The flurry of reactions underscores the mounting pressure facing the industry in Norway, which is western Europe’s biggest oil and gas producer. A debate about the future of fossil fuels is intensifying amid rising awareness of climate change and a number of smaller political parties are challenging Norway’s openness to drilling.
The country’s three biggest parties -- Labor and the governing Conservative and Progress parties -- have so far enforced the status quo. Stable and predictable terms have always been one of Norway’s main competitive assets in attracting investments from heavily-taxed oil companies.
But since Store succeeded Jens Stoltenberg as Labor leader, the party has adopted more climate-friendly positions. It was instrumental in enforcing a coal ban for the country’s massive sovereign wealth fund, and has become more restrictive in its views on opening oil drilling in the sensitive waters around the Lofoten islands.
Barth Eide’s comments echoed suggestions from one of his party colleagues during the 2017 election campaign that Norway should review the exploration cash refund it offers to companies that don’t yet have any income to deduct them from.
Questions over Labor’s commitment to the industry come in addition to potential electoral breakthroughs for oil opponents such as the Green Party, as well as legal challenges -- one of them against the exploration refund.
As recently as Jan. 10, the oil lobby’s Schjott-Pedersen said he was more worried about political risk than lower oil prices.
Controlled shutdown
Barth Eide said he entered the debate to partly support youth politicians, whose anti-oil stance has been under attack from industry executives. Labor’s youth group advocates a controlled shutdown of the industry by 2035, which Barth Eide doesn’t back.
But even as he clarified that Labor’s oil policy would probably remain unchanged through the next election in 2021, he couldn’t rule out changes down the line.
“You can’t give a sort of eternal guarantee for future policy,” Barth Eide said. “What was reasonable yesterday and is reasonable today isn’t necessarily reasonable in 15-20 years.”
