Post-COVID-19: Norwegian oil industry plans huge offshore expansion after tax break by Gov.

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The warning signs are getting louder. The Arctic is baking.

Earlier this week, the temperature in the Russian Arctic Circle reached a staggering 30C yesterday or 86 degrees Fahrenheit.

The mercury in the town of Nizhnyaya Pesha, in the far north of Russia, was 8 degrees hotter than the Mediterranean island of Ibiza.

Temperatures within the Arctic Circle have hit an astonishing 30C this afternoon. pic.twitter.com/8XbebEdRsn

— BBC Weather (@bbcweather) June 9, 2020

We are living in a climate crisis, yet we still carry on digging for more oil to make that crisis worse. There is growing international pressure for Governments to center any COVID-19 recovery programmes on a green transition, including through supporting a managed phase-out of oil and gas production.

However even countries that champion their so-called green credentials are failing. Norway is one of those countries.

It has long highlighted the fact that whereas many countries have wasted their oil wealth, Norway set up a sovereign wealth fund, which is meant to invest sustainably for the longer term.

In an interview with the Financial Times, Carine Smith Ihenacho, the Chief Corporate Governance Officer at the $1tn oil fund, urged Norwegian businesses that it invested in to think for the “longer term” for any post-COVID-19 recovery.

It is a pity that the Government of Norway is not completely thinking along those lines. The Government has, to its credit, presented a small NOK-3.6-billion ($384m) so-called green transition package to support hydrogen and offshore wind. The biggest chunk will be provided to the Government company Enova, as part of Equinor’s plan to build a 88-MW floating wind farm in the North Sea.

But that is where the good news ends.

On Monday this week, Reuters reported that Norway’s parliament had “agreed additional tax breaks for the oil industry on top of those proposed by the minority government to spur investment and protect jobs”, the ruling Conservative Party said on Monday.

Equinor and other oil companies had complained that the government’s plan to postpone tax payments of 100 billion crowns ($10.8 billion) was “not enough.”

The industry aggressively lobbied the Government, which “relented” according to Reuters. The new rules will cover the taxable profits of future projects.

And no sooner had the Government given more favourable tax incentives than the following day, Aker BP and Equinor confirmed they would go ahead with several new offshore oil and gas projects.

Aker BP, which is controlled by Norwegian billionaire, Kjell Inge Roekke, has awarded a 1 billion Norwegian crowns ($106.44 million) contract to oil service firm Kvaerner, controlled by the same billionaire, to build an unmanned oil platform for the Hod field, according to a further report by Reuters.

Karl Johnny Hersvik, CEO of Aker BP, said: “The petroleum industry is going through a very challenging time, and we are very pleased to see the rapid and strong response from Norwegian lawmakers .. In Aker BP, we will not let this opportunity go to waste.”

And today, Equinor and Aker BP released a further statement stating: “Following the recently announced changes to the Norwegian petroleum tax system, Aker BP and Equinor have entered into an agreement in principle on commercial terms for a coordinated development of the licenses Krafla, Fulla and North of Alvheim (NOAKA) on the Norwegian Continental Shelf and have started preparations for submitting Plans for Development and Operation (PDO) in 2022.”

The companies said that NOAKA is “one of the largest remaining field development opportunities on the Norwegian Continental Shelf”. Total investments are expected to be more than NOK 50 billion.

The Norwegian Government and Alker BP and Equinor are letting the climate go to waste as they continue drilling in the sensitive waters off Norway.

So once again a Government has sided with the industry rather than for the climate. The tax breaks were given despite a plea from ten environmental organizations, including Greenpeace, who recently called on the Norwegian Labour Party not to boost support for the oil industry.

All is not lost yet. In the coming days, there is due to be a final vote on the issue in Parliament. Civil society groups are now trying to stop the tax breaks for oil and gas. The best way to do this is to persuade the Arbeiderpartiet (Labour Party) to walk away from this dirty deal. Last week, the Labour Party leader, Jonas Gahr Støre, said the current crisis made the need for transformative action even greater – but now he might be about to vote for completely the opposite.

All the Labour Party has to do is read the existing evidence. Three years ago, OCI and other environmentalists signed The Lofoten Declaration which called for no new exploration or expansion of oil, coal, or gas, and a managed decline of the fossil fuel sector, especially in countries like Norway, that, from an equity perspective, should lead the transition off of oil and gas production. As my colleague, Hannah McKinnon said at the time “you can’t call yourself a climate leader if you are ignoring half of the problem.”

In response to the tax breaks currently on the table, our Senior Campaigner, Laurie van der Burg said:

“Billions are needed to get through this crisis, but handing them to oil and gas corporations in the form of tax deferrals will leave Norway more vulnerable instead. As a rich oil producer, Norway has a moral obligation to take the lead in ensuring a managed phase-out of domestic oil production, one that protects workers and communities, and to use its recovery plans to accelerate the transition to clean energy instead of to prop up a polluting industry.”