OSLO, 29 August 2003 — Norway’s oil industry asked the government yesterday for help in revitalizing fallow oil fields after several years without major discoveries on the continental shelf. “We are currently producing more oil and gas than we are discovering on the shelf. Fields are becoming depleted and platforms closed down,” Shell Norway managing director Johan Vold said.
In reports submitted to the Norwegian Oil and Energy Ministry, the Kon-Kraft working group said tax cuts on exploration activities were “urgently needed” and it called on authorities to allow prospecting in new zones. Norway, which produces between 2.8 and 3.0 million barrels per day, is the world’s third-largest oil exporter behind Saudi Arabia and Russia. However, because of a lack of new discoveries, oil production is expected to decrease in the coming years.
Norway is heavily dependent on revenues from the lucrative oil sector, which has made it one of the richest countries in the world. In 2001, Norway’s black gold accounted for 22.6 percent of gross domestic product and 45.1 percent of exports.
Kon-Kraft said that “if the proper measures were adopted today”, the oil sector could yield between “2,000 and 4,000 billion kroner (between 241 and 482 billion euros, $262 and $525 billion) by 2050”.
“There are considerable petroleum resources on the Norwegian continental shelf. But exploration for these resources is currently inadequate and smaller discoveries are not being developed” because of Norway’s high taxes and the lack of prospective exploration acreage, said Tore Torvund, a panel member and senior executive at oil and gas group Norsk Hydro.
He said these constraints meant many projects were not profitable enough, “even though they are socio-economically beneficial.” He said falling investment would hurt the entire oil industry, and weigh on employment levels.
Kon-Kraft therefore called for quick tax cuts which would lead to a win-win situation: an increase in exploration and production, which would in turn “considerably” increase the state’s revenues. Allowing new prospecting zones would also increase the chances of finding large oil reserves.
The state-controlled group Statoil has long wanted to see the Barents Sea opened to exploration, but authorities have been hesitant to give the go-ahead because of the environmental effects drilling would have on wildlife and the fishing industry. The Barents Sea is considered to have some of the cleanest and fish-richest waters in the world. The Kon-Kraft project was set up in 1999 and groups representatives of government, the financial sector, oil and shipping companies, unions and researchers.