Norway’s Election: What Next for Arctic Oil?

Photo by M.Lanteigne

Like many major oil-producing states, Norway’s economy was buffeted after 2014 when global petroleum prices fell rapidly after reaching highs of over $US110 per barrel. However, the Nordic economy stood out from the other oil producers for its ability to ride out much of the resulting financial storm due to its prodigious sovereign wealth fund, which reached a watershed value of US$1 trillion (7.8 trillion Norwegian kroner) this month. This did not mean, however, that debate about the future of the oil industry within the Norwegian economy has not been extensively debated, and the issue of tapping new oil reserves, especially in the Arctic, entered the political dialogue in the weeks before the 11 September national election.

The victory of the governing centre-right coalition, fronted by the Conservative Party (Høyre) led by Prime Minister Erna Solberg in this week’s vote would at first glance suggest a business-as-usual future for the Norwegian economy, and its petroleum industry. Certainly the results could be considered a product of sufficient confidence in the economic direction the country is taking, avoiding the financial chaos in many other parts of Europe over the past few years. However, the question of potential new development of Norwegian Arctic offshore petroleum as part of that economy will persist as the new government coalition takes shape.

In the final days of the campaign, polls were suggesting a close race between the centre-right bloc and the centre-left coalition led by the Labour Party (Arbeiderpartiet) headed by Jonas Gahr Støre, and there was also speculation that the Green Party (Miljøpartiet De Grønne) might play the role of kingmaker, bolstering Labour and its allies. A political shift to the left would have called into question new oil production in the Arctic, given the Greens’ opposition to future drilling, and calls for a reduction in the overall role of oil in the Norwegian economy. However, Labour ultimately lost six of its previous parliamentary seats, (while still being the largest party by seat count and voting percentage; the Norwegian election system makes a single party majority extremely difficult, and so coalition governments are commonplace). The Greens were unable to build on their single seat, dashing any hopes of a new red-green partnership forming the next government.

Despite global oil prices remaining stubbornly low, the Solberg government had announced plans in June of this year to open up ninety-three ‘blocks’ in the Barents Sea, including around the region of Bear Island (Bjørnøya) south of Svalbard, to oil exploration, a move which was condemned by environmentalist groups. It was suggested that the Barents Sea area north of the town of Hammerfest could contain as much as eighteen billion barrels of oil, as well as considerable natural gas supplies. The announcement drew considerable international criticism nonetheless, with an August 2017 report, issued by the NGO Oil Change International, accusing the Norwegian petroleum industry of contributing an excessive amount to global carbon emissions, and stating that opening up further Arctic drilling would harm the goals set up by the 2015 Paris Climate Accords, issues which according to critics flew in the face of the country’s reputation as a leader in green policies and technology.

Even before the new blocks were announced, the Norwegian government found itself the subject of a lawsuit in October of last year by Greenpeace and another environmental group, Oslo-based Nature and Youth (Natur og Ungdom), with claims that opening up areas of the Norwegian Arctic to oil drilling was contradictory to the Norwegian constitution [pdf], specifically Article 112, added in 2014, which clarifies the right to a healthy environment and that natural resources must be extracted with that provision in mind. The case is expected to be heard by the courts at some point in November this year.

Thus, the future of Arctic oil development under Oslo’s next governing coalition is not completely certain. In addition to shifting views on Arctic oil development, the Conservatives will have to formulate an Arctic energy policy while accounting for the differing views on the issue from would-be coalition partners, including the strongly pro-drilling stance of the far right Progress Party (Framstegspartiet) and the more sceptical views of the centrist Christian Democratic (Kristelig Folkeparti), and Liberal (Venstre) parties, which have advocated a much more cautious approach to further oil drilling north of the Arctic Circle.

Norwegian public opinion on the matter cannot be discounted either, especially in the wake of the Paris agreement and growing global dialogues on the connections between the energy industries and climate change. In an August 2017 poll [in Norwegian] taken by Ipsos and published in the Norwegian news service Dagbladet, a slim majority stated that they would be willing to place curbs on the country’s oil industry in order to reduce carbon emissions. The Norwegian Greens had argued that it was time for the country to contemplate its economic options beyond the oil industry and prevent potential instability as fossil fuel supplies taper off in the future. Late in September, a report surfaced that the Solberg government was willing to defer a decision on further oil and gas surveys for four years in exchange for support from the centrist parties.

Norway is not the only Arctic state which is addressing an expansion of oil and gas industries in the far north. Russia has taken a ‘full speed ahead’ approach with its own oil and gas development plans in Siberia and the Arctic Ocean, despite low energy prices and Western-backed sanctions. As well, the Trump government in the United States has also announced plans in May this year to reverse previous bans on Arctic drilling in Alaska; (the US had confirmed its withdrawal from the Paris accords in June). As Norway’s emerging Arctic energy policy takes shape under the next government, the larger debate between energy and environmental concerns in the Arctic shows no signs of abating. – OtC