Norway chooses not to explore new oil fields, may invest billions in renewables

Enlarge / A faint but colourful aurora from the Lofoten Islands, Norway, on March 10, 2018.VW Pics/UIG via Getty Images

On Saturday, the leader of Norway's Labor Party said the party would stop pushing for oil exploration in the country's ecologically-sensitive Lofoten Islands, according to Bloomberg. Norway is a major oil producer, pumping more than 1.6 million barrels of oil per day from its oil-rich offshore areas.

Permission to conduct exploration missions in the waters off the Arctic Lofoten Islands has been at the top of the wish list for Norway's powerful oil industry. The waters have been estimated to contain a reserve of one billion to three billion barrels of oil, and state-owned oil company Equinor has said that exploiting Lofoten is key to maintaining Norway's status as an oil powerhouse in the future.

Norway is particularly invested in oil. The country maintains one of the largest sovereign wealth funds in the world, built on the profits of the state's oil industry. The so-called Government Pension Fund has assets worth more than $1 trillion.

Thus far, Norway's parties have held Lofoten exploration at bay by using it as a bargaining chip in political negotiations. But with the sizable Labor Party's official opposition to exploration, oil companies see almost no future in Lofoten exploration.

Bloomberg notes that the Labor Party's move also "adds uncertainty about how much support the [oil] industry can expect from Norwegian politicians in the future." The oil industry in Norway worries that if the Labor party gains more power, oil might lose certain tax refunds for exploration activity or face gas taxes.

The Saturday announcement was not universally supported by every backer of the Labor Party; the oil industry workers' union, known as Industry Energy, criticized Labor's move.

Permission to invest

As the oil industry has faced burgeoning opposition at home, government has made it easier for managers of Norway's Government Pension Fund to invest in renewable projects. Norway's Minister of Finance announced on Friday that it would permit the fund to invest up to NOK 120 billion (USD $12.9 billion) in unlisted renewable projects, that is, projects carried out by companies not listed on a stock exchange. That number reflects a doubling of the Government Pension Fund's previous limit of NOK 60 billion.

"The market for renewable energy is growing rapidly," a Norwegian government press release read. "A major part of the renewable energy investment opportunities is found in the unlisted market, especially in unlisted infrastructure projects."

However, the fund is still required to meet performance expectations, and fund managers might not invest the full amount in renewable energy projects if they don't find projects that are safe enough. In order to mitigate risk, the Norwegian government also proposed an upper limit on unlisted renewable energy infrastructRead More – Source