The golden days of Norway are over

Norway The golden days are over

"Thank you for your commitment. This is a great and historic day. I congratulate - and hereby officially declare the Goliath platform open."

A sunny day in mid-April in the Barents Sea off Hammerfest, more than 600 kilometers north of the Arctic Circle. Norway's oil minister Tord Lien stands in a neon yellow protective suit in a huge hall on the Goliat oil rig and cuts a red ribbon - surrounded by 50 workers and selected guests whom the operator Eni Norge had helicoptered onto the platform. Goliat is the first offshore field in the Norwegian part of the Barents Sea to produce oil - the northernmost in the world, as Andreas Wulff, Head of Communications at Eni, emphasizes:

"Goliath is a pioneering project. Technically, something like this has not been attempted anywhere else. We have proven that production can work in the Barents Sea."

In addition to Goliath, only the Snow White field is currently in production in the Barents Sea. (Deutschlandradio / Jana Sinram)

New supplies for 15 years

In addition to the Italian Eni Group, the Norwegian Statoil has a 35 percent share in the project. Funding has been running since mid-March. The corporations assume that there are around 180 million barrels of oil under the ocean floor. The supplies should last for 15 years. But the start of production comes at an extremely inopportune time: At an oil price of around $ 40 per barrel, Goliath is far too expensive to make a profit. The platform cost at least 47 billion Norwegian kroner - the equivalent of around five billion euros. Originally, Eni had estimated 30 billion. But there were technical difficulties. The project was delayed for more than two years. At the planned start date in 2013, oil was being traded significantly more expensive than today - Eni spokesman Wulff, however, dismissed this objection:

"We know from history that oil prices fluctuate again and again. They are currently relatively low. But we expect that they will rise again."

Norwegian analysts have calculated that Goliath can only break even if the oil costs more than $ 90 a barrel. Eni himself assumes a significantly lower number:

"Our breakeven point is below $ 50. We generally don't go into details. But we are sure that Goliath will make a profit. And the Norwegian people will also earn good money in the end. This will make Goliath positive for social development in Norway contribute."

Project with great technical difficulties

Norwegian Energy Minister Tord Lien also expects this. Goliath is a milestone for the country, he says:

"Of course, we prefer when projects stay on time and on budget. But this project had major technical difficulties to be solved, and we managed to do that. Eni, Statoil, the suppliers and all other players in the Norwegian can do this Take the continental shelf with you when it comes to opening up new fields. "

Because the minister leaves no doubt that despite the low oil price new fields are to be developed:

"This is the largest and most important branch of industry in Norway, employing 200,000 people. And from a European point of view, too, I think it is important that a democratic country that places great emphasis on environmental standards contributes to the energy security of future generations."

"There is no doubt that the situation is challenging." Oil Minister Tord Lien (center) on the platform. (picture-allicance / dpa / Jan-Morten Bjørnbakk)

The Norwegian minority government consisting of the conservative Høyre party and Lien's populist progress party is increasingly relying on the north of the country. In the most recent round of concessions, it put out to tender many as yet unexplored areas for exploration, almost all of which are in the Barents Sea, a few in the Norwegian Sea further south. It is the first time since the mid-1990s that industry has gained access to completely new areas, emphasizes the Norwegian energy minister, pointing out that around 25 companies have applied for the 57 sites - despite the turbulence on the energy market:

"There is no doubt that the situation is a challenge. But the Norwegian authorities are ensuring a stable fiscal and economic framework. That is why the international corporations are still very interested."

Ecosystem under stress

The Barents Sea is still largely untouched off the coast of the northernmost Norwegian province of Finnmark. Besides Goliat, only Snow White has been in production so far: The Statoil Group has been producing natural gas from this field since 2007 and processing it on the island of Melkøya off Hammerfest. This has brought many new jobs and residents to the small town. But the main industry in the rest of Finnmark remains fishing. That is one of the reasons why environmentalists are critical of the energy projects. Also Frederic Hauge, founder and director of the environmental organization Bellona:

"We work here in one of the most sensitive areas of the world. And in one of the five most important areas for global fish production. The ecosystem is already exposed to great stress, from environmental toxins, air pollution and nuclear waste from the Russian side. It has to change in a very short time to adapt to very large changes. "

Hauge criticizes that safety and environmental requirements are not being complied with on the Goliat drilling platform. Nor does he believe Eni's promise that Norwegian society will make a lot of money with oil from the Barents Sea. After all, the oil and gas sector is highly subsidized.

Environmentalists against tax breaks for oil companies

"The Norwegian oil from the Barents Sea is too expensive. There should simply be no production here. But the largest organization in Norway is the" Denyers Club ". It consists of people who simply do not want to see what is happening."

For example, that the world no longer needs expensive Norwegian raw materials when the oil from Saudi Arabia is much cheaper. That is why the environmentalist has proposed abolishing all tax breaks for the oil companies. But energy minister Tord Lien waves it aside:

"It's no secret that most environmental organizations would like to get rid of the Norwegian oil industry altogether. But that's not the government's policy."

The oil company is pleased. At the Barents Sea Conference in Hammerfest in mid-April, all the important representatives of the industry gathered to discuss the future. Lien call her "our beloved Minister of Oil" here. And when Eni communications chief Andreas Wulff, accompanied by dramatic music, shows a video of the Goliath opening at the beginning of the meeting, both men are enthusiastically celebrated.

But the optimism is no longer as great as it used to be, says Thina Saltvedt. The doctor of economics has been working as a senior oil analyst at the financial group Nordea for many years:

"Current production is already profitable at a price of around $ 26. But new projects are more expensive, most recently they were around $ 40 to $ 70 a barrel. If the price is around $ 40, as it was recently, many of the planned projects are not profitable So they will either be postponed or canceled entirely. "

Projects in the Barents Sea are particularly costly

It is true that companies like Statoil have managed to reduce their costs with new technologies in the past few years, says Saltvedt. In the Barents Sea, however, the projects are particularly costly because the fields are so far out and, unlike in the North Sea, there is a lack of infrastructure. Nevertheless, there is interest in the areas because the fields in the North Sea have been exploited for over 30 years:

"Where we have been producing up to now, supplies are running out. In order to stabilize production, the natural decline must be replaced. That is why everyone is now going north."

The only positive exception in the North Sea, according to analyst Johan Sverdrup, is a huge field that was only discovered in 2010 and that presumably contains enough oil for the next 40 to 50 years. In general, however, Saltvedt finds that the Norwegians have relied too much on oil as a raw material in recent years:

"People relaxed and thought that the oil business would go on forever. But what nobody considered: Production has declined significantly since 2001. The high prices have more than made up for that. But now to bet that the Oil price will rise again to $ 100 or more, which I think is difficult and quite risky. "

Oil companies need to cut costs

Many of the oil and gas companies seem to have relied on the high revenues and not prepared for worse times. Now they have to make massive cost savings, and this is felt above all by the employees in the south-west of the country, says Gerd Kristiansen, head of the largest trade union confederation LO:

"We now have almost 140,000 unemployed in Norway. That is a lot for our country. We used to have a quota of less than three percent. The oil crisis has changed that. As a result, 40,000 people in this industry have lost their jobs."

Workers in a large hall. Around 40,000 people have already lost their jobs in the oil industry (picture-allicance / dpa / Jan-Morten Bjørnbakk)

And the union boss is not only worried about those affected:

"The revenues from the oil and gas industry finance about a fifth of the national budget. That alone says a lot about the importance for our welfare state. If the oil price does not rise again and activities on the Norwegian continental shelf increase, then we will have to part of our social benefits shorten. "

Fund for Bad Times

Spring in Oslo. The prosperity that Norway has accumulated since the first oil discovery at Christmas 1969 is particularly noticeable in the capital. Hans-Olav Syversen is chairman of the finance committee. Rising unemployment is due to a combination of low oil prices and high costs, the Christian Democrat analyzes. But he does not see the situation as dramatic as the trade unionist:

"The state budget itself does not change due to the oil price, because we have a fund. This balances out good and bad oil years. So the situation has no direct consequences for 2016 and 2017. This could only change in the long term: the fund could shrink."

The oil fund that Syversen is talking about is considered to be the largest sovereign wealth fund in the world. Established in 1990, all revenues from the oil and gas industry have been paid in since the mid-1990s, tax revenues as well as direct income from state oil companies. The fund is worth around 7,000 billion Norwegian kroner - 700 billion euros - today. The official title is "State Pension Fund Abroad". That says a lot about the founding idea. Hans-Olav Syversen:

"When the day comes when we turn the last tap, then we still have the fund, which continues to generate returns and thus money. So hopefully we will be able to live on the savings when we run out of oil and gas revenues This is important to us because not only one or two generations should benefit from the oil, but also the future. "

In 2016 the piggy bank for the first time

The aim of the foundation was also to prevent an inflated budget as well as sudden financial slumps, from which, for example, Russia suffers in view of the price jumps in the raw material market. Of course, just saving the oil money was not an option. So the government had to think twice, explains Karl-Eirik Schjøtt-Pedersen, Minister of Finance in the social democratic government of Jens Stoltenberg in 2001:

"In a country with as much wealth as Norway you have to explain to the population how much money you can spend. So we introduced the rule that only the surplus from the capital can be used."

In 2001 the government estimated how high this annual surplus would be based on the situation on the stock market at the time. Karl-Eirik Schjøtt-Pedersen:

"According to our rule, a maximum of four percent can be withdrawn from the fund per year. The oil price only influences how much new wealth flows into it. The budget, on the other hand, depends on the total capital."

The rule introduced in 2001 still exists today. In January, however, Finance Minister Siv Jensen withdrew more money from the fund for the first time than came in as new oil and gas revenues: a good 700 million euros to offset budget expenditure. State Secretary Paal Bjørnestad believes that the fact that the international press therefore spoke of a fall from man and "reaching for the nest egg" is nonsense:

"That's wrong, because the 7,000 billion crowns are not in a piggy bank. If they were in a piggy bank, then we would actually have put less in than we took out. Fortunately, the 7,000 billion is invested in 9,000 companies. So we make money with it and more than we use. "

The value of the fund sometimes fluctuates in seconds

The State Secretary points out that even less than the permitted four percent from the state fund are planned in the latest budget. At the end of the year, the rules will be adhered to despite lower economic growth due to oil prices and rising unemployment.

The country manages its oil fund in its own unique way. Norges Bank Investment Management, a division of the central bank, is responsible. It sits on the top floor of a venerable building in Oslo and, on behalf of the Ministry of Finance, invests 60 percent of its oil assets in shares, 35 percent in interest-bearing securities, and the remaining five percent in real estate - exclusively abroad and in accordance with certain ethical guidelines. The fund owns company shares in 78 countries - including Germany. He has just announced that he will join the class action lawsuit against Volkswagen over the emissions scandal as an investor. The value of the fund fluctuates by many millions of euros in a matter of seconds. It is crucial to see him as a long-term investor, says finance committee boss Hans-Olav Syversen:

"If you watch every month or quarter individually, you can get nervous. But we have to relax and wait."

The Chairman of the Finance Committee in the Norwegian Parliament, Hans-Olav Syversen. He belongs to the Christian People's Party. (Deutschlandradio / Jana Sinram)

Therefore, Syversen thinks it is okay that capital was withdrawn from the fund for the first time. At the beginning of the year a lot came together, says the Christian Democrat, whose party supports the minority government in parliament: the low oil price, rising unemployment and turbulence on the stock markets.

"Otherwise we would have had to make drastic cuts in the budget, and that would have caused much more unrest and economic stagnation. That would have been much worse than withdrawing capital for a short time."

Norway needs new industries

In the long term, however, other solutions would have to be found, emphasizes the Norwegian financial politician:

"We have to reckon with the fact that the fund no longer grows so strongly that the oil activities and the price decline. Therefore we have to consider what other economic legs Norway can stand on in the future. This is the sense in which the current situation is for us maybe even very healthy: it is a warning sign. "

That's how oil analyst Thina Saltvedt sees it. She is happy that politicians have recently started talking about the necessary economic change.

We have made ourselves too dependent on the oil sector. And that's worrying. We have seen that in many other countries. We need a broader economy. But oil has brought us wealth, a high standard of living and a lot of interesting technologies that we can now use in other areas. I think we can do it. But we have to look ahead, finally get started and start something exciting new.