Why Norway may leave $65bn worth of oil in the ground

By M.F.

EARLIER this month the fjords of Norway’s Lofoten Islands rang out with the cries of activists. For an entire week, environmental groups and local fishermen rallied to oppose plans to drill for oil near the pristine archipelago. The demonstrations were timely: Norway is due to hold parliamentary elections in September, and the country’s two main parties—Labour and the Conservatives—are both in favour of lifting a ban on oil excavation around Lofoten. The areas surrounding the archipelago are estimated to hold 1.3bn barrels in resources, equivalent to more than $65bn at today’s prices, if all of that is found to be easily accessible oil. Norway’s oil production has nearly halved over the past 15 years, and is set to fall by another 11% by 2019. The government says Lofoten “must at some point come into play”. Yet many analysts expect the moratorium to remain. Why?

One reason is the environment. Lofoten is home to the world’s largest cold-water coral reef and mainland Europe’s biggest seabird colony. About 70% of all fish caught in the Norwegian and Barents seas use its waters as a breeding ground, which in turn provides rich feeding to a population of seals and whales. Activists also argue that opening up Lofoten to exploration is incompatible with Norway’s pledge to respect the Paris climate agreement. Full compliance with its goals would implythat two-thirds of today’s fossil-fuel reserves must be left in the ground.

Economic arguments further tilt the balance against exploration. With little infrastructure around Lofoten, which lies within the Arctic Circle, exploiting the reserves would require vast investment. Yet oil prices remain low, and Norway’s largest export market, Europe, is trying to wean itself off fossil fuels by boosting renewable energy. Moreover, drilling would hit tourism. A million visitors travel to the archipelago every year for its natural beauty. And the developments around Lofoten would be much closer to the coast—and therefore more visible—than most of Norway’s oil platforms, which are hundreds of miles offshore, says Joseph Dutton of the think-tank E3G.

Finally, politics plays a part. A poll published this month by Dagbladet, a newspaper, found that nearly half of Norwegians now favour leaving buried oil reserves untouched, to limit carbon emissions. Since 2001, when a temporary ban was first put in place, the country’s biggest parties have been forced to compromise with smaller peers, which have extracted commitments to safeguard Lofoten as a price for their support. Nevertheless the main parties have been trying to prepare the ground for exploration by allowing mapping of the seafloor and pushing for impact studies. But they are unlikely to prevail. The tiny Green Party won a surprise power-broking position in Oslo’s most recent municipal elections. If it makes a decent showing at national elections, it can be counted on to help keep the oil in the ground.