In a recent interview with Bloomberg, Tord Lien, Minister of Petroleum and Energy in Norway, expressed his somber beliefs concerning the recovery of the oil price. While many are hoping that the price will rise to its past highs, Lien states that “It’s better to plan for $60 and let the people who want to hope for $100, hope for $100.”
Lien’s view is a realistic one, as it is prudent to accept the fact that the rise will be slow and steady despite the fact that many people would like to see the oil price skyrocket to new highs. Expecting the price to come anywhere near past figures within a short period of time is just wishful thinking.
Similar to other countries, such as Saudi Arabia, Norway has been forced to withdraw from its sovereign fund, which holds about $850 billion. It is difficult to forecast budget spending when a country’s economy relies so heavily on oil. Nonetheless, Norway has not changed its economic tax program, which offers tax-break incentives for companies to explore and develop new drilling locations.
Norway is still hoping to continue its exploration into the Barents Sea, but the minister additionally encourages Norweigan companies to invest in extracting and producing oil from existing wells. Lien stated that, due to the economic tightening, the country must “make sure that no resources in place on the Norwegian continental shelf are wasted due to short-term decisions,” effectively calling out producers who hope to abandon sites.
Norway recently licensed new areas of land to oil producers hoping to drill, indicating the country’s need for new areas to maintain production levels in the future. This is quite a large step for Norway, as the country has not licensed new land to drillers in over 20 years, showing that the government holds a strong belief that these new areas will have some beneficial resources waiting to be unearthed.
Article written by HEI contributor Timothy McNally.