Commentary, 5/6, 2003

Published Dec 12, 2003
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Processes of Change
Never so bad it’s not good for something. During the previous downturn in the Norwegian oil & gas industry many companies were forced to look outside the Norwegian Continental Shelf (NCS) for new contracts. As a result, the industry went through a healthy changing process and became more internationally competitive.

It was not without pain, all changing processes involve difficulties. Therefore they are very often avoided, and happen only when forced forward by external conditions.

Now we are experiencing a new downturn on the NCS, this time within exploration. And this time the authorities might be in line for a changing process. During the past years we have seen a change in the Norwegian oil & gas politics. Most notably from state-ownership to an industry with more private ownership. But further changes will be needed, as the realisation that the NCS is a mature region sinks in with the politicians.

The thing with private companies is that their primary sense of duty and responsibility is to their shareholders and not to their nation - if indeed they have one in this globalized industry. The major oil companies might disappear from the NCS if no changes are made to the exploration and production tax condition, as well as to exploration acreage. This time the politicians feel the pressure form outside changes.

Last year the Norwegian state collected NOK 90 billion in taxes from the oil companies on the NCS. As we see the exploration rate drop drastically we can also calculate a drop in those revenues over time. The oil companies have stated a dedication to further exploration on the NCS, given a more risk friendly tax regime. Norsk Hydro is one of the companies that have voiced a need for lower tax on new fields. Today oil companies pay 78 percent tax on oil and gas production. On the other hand there is a need to remember both for politicians and the industry that the revenues come from non-renewable resources.

Of course politicians need to keep a broad view, but so do private companies. Norsk Hydro is also in the forefront when it comes to doing research into more environmentally friendly energy sources. One of the industry’s primary resources is a lot of competent people with ideas for the future. Still, they have to survive in a competitive environment today - at the same time as they are planning for the future.

Norway continues to produce and export natural gas. Politicians have not been able to agree on an increased use of natural gas in Norway, but several new initiatives might change that. The present government has expressed a wish for increased focus on use of natural gas and on research into gas technology, although not much action has been seen so far.

But recently the Oil & Energy Minister Einar Steensnæs, opened a new Centre for Gas Technology in Trondheim. As he lit a torch of gas to mark the opening of the centre he also lit a hope for all those working within the industry to further develop gas as a resource used also in Norway.

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