Watching the World: Two ministers

Nov. 12, 2001
Norway's new oil minister and his UK counterpart recently shared a platform in London to outline their views on how the North Sea oil and gas industry will develop.

Norway's new oil minister and his UK counterpart recently shared a platform in London to outline their views on how the North Sea oil and gas industry will develop.

Although the ministers come from different sides of the political spectrum, the messages were essentially the same. Indeed, the uninitiated could have been forgiven for thinking that they had dropped their respective speeches on their way to the platform and in the ensuing paper-shuffling picked up the wrong one.

Good news, bad news

The fact that there is such agreement could be interpreted as either good news, in terms of stability, or not-so-good news in terms of taxation philosophy. The North Sea, as they both outlined, is on the whole a good place to do business. There is long-term stability, which allows the planning needed to meet the technological challenges that lie ahead. There is a skilled and motivated labor force, and over the past 30 years both countries have built up the technical infrastructure and educational resources to keep the sector at the forefront of development.

However, it is a high-cost, high-tax environment of the type that can be badly hit by falling demand, falling prices, or a combination of both, as we are now seeing.

However, the attitude of the two ministers gives cause for optimism.

Norwegian view

The Norwegian Minister, Einar Steensæns, said that he has a vision to see Norwegian petroleum production extend well into the future, develop and apply new technologies, and encourage the presence of competent Norwegian and international companies.

He did emphasize, however, that this vision implies that the sector will continue to contribute tofunding the Norwegian welfare state.

Steensæns said that the Norwegian government will work constantly to adjust the oil and gas framework conditions so that it attracts the most qualified companies. He believes that the role of the government is to develop a framework within which the industry will find it attractive to work.

Steensæns also said he recognizes that the North Sea basin is maturing, and hence future developments will have different characteristics. Developing smaller discoveries and increasing the recovery rate from existing fields is of crucial importance.

UK stance

This is something that the UK has been working on and changing its tax regime to encourage.

UK Oil Minister Brian Wilson is already able to point to government-assisted schemes in place to maintain a production level of 3 million boe/d-a £3 billion/year investment-prolong self sufficiency, sustain up to 100,000 more jobs than there otherwise would be, increase exports by 2005, and create £1 billion/year additional revenue from new business.

In the coming weeks, the new Norwegian minister will be bombarded with advice and special pleading, but the fact remains that many in the industry take the view that, at present, the North Sea can be a good place to develop technological solutions but not such a good place to profitably apply them.