Electoral storm in the future of Norwegian oil

Electoral storm in the future of Norwegian oil

Lorenzo Colantoni
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One of the main issues of the Norwegian general election, set for September 11, is the energy sector, a new item on the agenda which puts pressure on Norway's three main parties. According to a recent poll, 44 percent of Norwegians would like to limit hydrocarbon production in order to reduce CO2 emissions

It looks as if Norway’s elections on September 11 are going to be complicated. The new element is the unprecedented and extensive attention being paid by the Norwegian electorate to the future of the oil and gas sector, which puts pressure on Norway’s the three main parties. These actually have a strong lead over the other, considerably smaller, parties. According to the latest polls the Arbeiderpartiet (Labor) party is neck-and-neck with the Høyre (Conservative) party at 26.1 percent, the Fremskrittspartiet (Progress) party is at 14.7 percent, while the others range between 3 and 7 percent. Yet, if these were to be the actual results, losses compared to the previous elections held in 2013 would be low for the Conservative (down by 0.7 percent) and Progress (down by 1.6 percent) parties, but the outcome would be disastrous for the Labor party, which would be down by 4.7 percentage points. These results would undermine the parliamentary balance, which has held in the last four years thanks to the alliance between Conservative and the Progress party, a populist and neoliberal party that many regard as close to right-wing positions. Figures from the latest polls suggest that the smaller parties would be able to gain more prominence and become key in Norwegian politics. Among them, the Miljøpartiet De Grønne (the Greens) could play an unexpected role.

The Greens, potentially a key political force

There are actually several small parties in the Norwegian political landscape, and in recent elections most of them gained more votes than the Greens, with their 2.8 percent and just one parliamentary seat; they include Venstre (liberals), with 5.2 percent, Centre (anti-EU) with 5.5 percent, and Krf (Christian Democrats) with 5.6 percent. In this new round of elections, however, the Greens seem to be closer to gaining one or two extra percentage points compared to 2013, an increase that may be enough to enable them to become a key political force in the new Norwegian parliament, as was the case in the recent municipal elections in Oslo. The same might be true for the SV (socialist left, with 4.1 percent in the last elections) and the RED party (extreme left, anti-NATO, with1.1 percent), all of which are in favor of putting a stop to oil concessions. Their program is not shared by any of the three main parties, but mirrors closely the opinion shift of the Norwegian electorate. In recent years, civil society’s activities and, more generally, the opinion of the Norwegian electorate have shown falling support for the hydrocarbon industry, which public opinion in the country has always consistently supported in the past. As, for example, by a recent poll 44 percent of Norwegians said they were prepared to scale back Norwegian oil production in order to reduce CO2 emissions, compared to 42 percent against such a policy.

 

The shift may be due to the impact of the Paris Agreement, but it has mostly to do with economic reasons – the same which have been at the center of the electoral campaign.  The Norwegian economy has been hit hard by the collapse of oil prices, most significantly by the 40 percent drop in revenues in 2016 compared to 2015 (almost 5 percent of Norway’s GDP) and the loss of forty-seven thousand jobs in the oil industry between 2014 and 2016. Many Norwegians therefore fear that investments in the sector may become stranded assets, particularly given the high production costs of Arctic hydrocarbons and the ongoing decline in Norwegian production, which has fallen by 50 percent in the last fifteen years and will lose a further 11 percent through to 2019. Against this background, the proposals by the Greens may reflect the electorate’s wish to diversify the national economy away from hydrocarbons. It is clearly impossible for the small environmentalist party to achieve such major success as to influence Norwegian policy so drastically. It could, however, act as a broker in setting the government agenda, negotiating with the ruling party (probably the conservatives and the incumbent Prime Minister Erna Solberg, according to the current polls) some important concessions on issues connected with the future of the oil industry in exchange. It may, for instance, try to limit Arctic exploration from which Norway aims to extract 9 billion barrels necessary for the survival of its hydrocarbon industry.

The case of the Lofoten archipelago

A similar situation has already arisen in the Lofoten archipelago, the object of an ongoing ban on drilling that is keeping 1.3 billion barrels of oil valued at USD 65 billion underground thanks to negotiations between the main parties and the smaller ones. It has to be said, however, that Lofoten is a peculiar case, as a natural wonder where drilling would have a much greater impact than the current offshore oil rigs, the heart of Norwegian production. Also, since there is no existing infrastructure in or near the archipelago, extraction costs would be particularly high. This would make compromise easier since the political and economic price of a block on drilling in the Lofoten archipelago is therefore lower than it would be for other drilling areas, albeit also challenged, in the Arctic, like those of the Barents Sea. While it is hard to predict the outcome of next Monday’s election, the possible instability arising from a broad coalition government is a litmus test for Norway’s discussion on the future of Western Europe’s biggest hydrocarbon industry, and of one of the leading European partners. It is a discussion which Europe, in view of its ever-present needs for diversification, will have to watch closely.