Oil and gas in the capitals

After almost a month of bargaining following the September parliamentary elections, the victorious Conservative party mustered a minority cabinet, albeit with conditional support from two other parties that preferred not to take part, but not to stay entirely outside. Thus, the new Conservative government may be hostage to a minority in parliament and the nation. This affects petroleum policy.

The situation confirms the multi-dimensional complexity of Norwegian politics. In addition to the common left-right cleavage between partisans of state intervention and those of the market, there is a cleavage between supporters of the environment and decentralization, and, often, opponents of globalization, and those of industry and centralization, as well as globalization. Generally, the two cleavages do not coincide. There are both left-leaning and right-leaning centralizers and decentralizers.

The petroleum industry is opposed from the right, as well as from the left, and its supporters are split between market and governmental control partisans. An attempt to put the cleavages on a single scale might start at the far left, placing the Left Socialist “greens” as anti-oil; continuing with the moderate left Labour as pro-oil, then to the center-right Liberals and Christian Democrats as anti-oil “greens,” to some extent joined by the Centrists, ending with the right, the Conservatives and the Progress Party, as pro-oil. The two groupings favorable to the oil industry make up a decisive majority in the nation, but the two minority groupings that are less favorable are strategically placed in the political spectre, able to influence policy.

Norway’s parliamentary election results on Sept. 8-9 were more or less as expected. The Left Socialists were almost wiped out, the Conservatives gained, as did the Liberals, and the populist right-wing Progress Party suffered heavy losses. The centrist parties, including the Liberals, Christian Democrats and the agrarian Centrist Party, did remarkably well. Apparently, a number of voters deserted the Left Socialists for the Liberals. For the first time, the Green Environmentalist Party got a seat. These results confirm a strong green/environmentalist/decentralist component in Norwegian politics. Labour suffered moderate losses, but remains the largest part. Nevertheless, Prime Minister Jens Stoltenberg stepped down Oct. 16, after presenting next year’s budget proposal to the new parliament.

The new prime minister is the Conservative leader, Mrs. Erna Solberg. Although the four potential partners—Liberals, Christian Democrats, Conservatives and Progress—together do command a majority, major disagreement does divide them profoundly, especially on petroleum policy. The Conservative preference was a four-party coalition that would enjoy a solid parliamentary majority. The obstacle has been the mutual antipathy between Progress and Christian Democrats, and, to a lesser degree, Liberals. A parliamentary majority would require the Conservatives and Progress to include the Liberals. The non-majority solution is the Conservatives plus Progress, with conditional parliamentary support from Liberals and Christian Democrats.

Petroleum issues include the industry’s rate of investment; exploration offshore the Lofoten and Vesterålen islands in northern Norway, as well as the Jan Mayen area; the level of state ownership of Statoil; engagement in Canadian tar sands by Statoil, and a host of other questions.

The Conservatives, supported by Progress, prefer to continue investing in petroleum, to explore for oil in the areas mentioned, to give Statoil free hands abroad, and to reduce state ownership of the company from 70% to 51%. Except for the latter point, Labour agrees. Liberals and Christian Democrats disagree strongly, wanting to curb petroleum investment, as well as tar sand involvement abroad, and keep critical coastal areas (not only in northern Norway) free of E & P activity for four years. They seem to agree, however, to scale down state ownership of Statoil.

Against this backdrop, the minority government might prefer not to rock the boat, at least not very much. To placate Liberals and Christian Democrats, there will be restrictions in critical coastal areas, and some reduction in state ownership of Statoil. These changes would hardly be revolutionary. The four parties might, however, agree on taking more dividends from the company, depending on Statoil’s performance and the budget’s health. There may be a more active policy to promote smaller, independent oil companies, both Norwegian and foreign, to enhance the industry’s diversity and competition.

Against this backdrop, the parliamentary coalition of Conservatives, Progress, Liberals and Christian Democrats might see serious internal divisions over petroleum, possibly leading to a split. In that case, the outcome might, at first, make the Conservative and Progress government a hostage of Labour support in parliament, followed later by a single-party Labour government pursuing an expansionist petroleum agenda, with the parliamentary support of Conservatives and Progress.

Norway is not entirely comfortable with its petroleum wealth. There is unease about the environmental risk, even with Norway’s strict HSE regulations. There is unease about the economic impact, perhaps because Norway’s five million people share a sovereign wealth fund approaching $1 trillion, with a 2012 GDP, per capita, of about $100,000, about twice the U.S. level, and a budget surplus of about 14% of GDP, against a deficit of 8% of GDP. Many will argue that oil has brought unprecedented prosperity, but also a cost level that is unsustainable. It would be paradoxical, if the new government should opt for a lower level of petroleum activity than the preceding one, but it cannot be excluded.