Commentary 9/10, 2006

Published Oct 16, 2006
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In the Balance
It’s now the first week in October, and it’s time for the Norwegian Government to present its annual budget for the coming year. But this year it’s a bit of a special situation.

The sitting coalition Government – the so-called Red-Green Alliance – has now finished its first year in office, and as with any new government, the reviews of the first year have been mixed. Every twist and turn during the last year has been examined under a microscope to see if the ruling parties have strayed from their declarations made just prior to taking office. As the old adage goes, “You can’t please all the people all the time…”

So the proposed national budget – which will most likely be passed by the majority coalition – has been released to mixed reviews. From almost all walks of life we hear disappointed voices. For many, this budget falls short of the promises made by the ruling coalition. Of course, if everyone were to receive the amounts they would like, the available funds would be gone long before all the outstretched hands were filled.

So as the word “budget” implies, there will be a compromise between what the citizenry needs and what it wants. Perhaps the best possible budget is one that disappoints the most possible people, as that budget may in fact be the most responsible. Everyone agrees that services such as child care, schooling, hospitals and infrastructure maintenance must be funded. What is interesting is how the funds are to be raised and how fees and taxes will affect everyone – from individuals to corporations.

For the oil industry working on the Norwegian Continental Shelf (NCS) two areas of the budget are of interest. The first is the impact on the business of doing business, that is, on industry as a whole – Norway Inc. Second, the industry is concerned with budget proposals that trickle down from parliamentary committee to the Ministry of Petroleum and Energy. Specifically, what does this Government intend to do to aid in the future of oil and gas industry?

To think about the first area, it’s best to consider what business itself thinks about this budget. The Confederation of Norwegian Enterprise (NHO) is unhappy with proposed tax hikes called for in the 2007 budget. According to NHO, new taxes will reduce economic stimulus for business. On the positive side, NHO favourably views the funding earmarked for road maintenance and increasing railway transportation of goods.
Where NHO is most adamant is when it comes to how deeply the Government can dip into Norway’s oil fund (now called The Government Pension Fund – Global). According to NHO, the NOK 8 billion proposed is 8 billion too much, sending a wrong signal about the use of oil wealth.

From the oil industry’s perspective, we hear from The Norwegian Oil Industry Association (OLF). This association voices concern that the proposed measures to reduce industry’s production of nitrogen oxides (NOx) is not reasonable – that it’s more a fund-raising scheme than a show of true concern for the environment.

But OLF is pleased with the proposed NOK 70 million to be used for seismic surveys in the Nordland VII og Troms II areas of the far north. Yet this is a far cry from the NOK 20 billion fund for research into production and use of renewable energy and increased energy efficiency that was proposed earlier this year, which could mean, once the funds are in place, hundreds of millions NOK toward such research each year.

Granted, the oil and gas industry does have Government-supported mechanisms already in place to support expansion and growth (which remain unchanged), but only the future will reveal if this Government’s level of commitment is high enough.

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