For decades, Norwegian oil and gas producers have gone about their business with little interference from politicians, who were happy to see the country grow wealthy on the back of abundant energy undersea resources.
But the political winds around drilling rigs in the North Sea are shifting.
One big sign of the government’s new attitude toward energy companies came when opposition parties in parliament tried to push through carbon-reduction measures opposed by the industry, and give lawmakers more say in investing the country’s $840 billion sovereign wealth fund.
Another sign has been the rise of a new kind of oil magnate on the staid Norwegian scene, the kind embodied by the larger-than-life Kjell Inge Roekke.
The 55-year-old has a passion for boats -- from trawlers to the speedboats he races. He also has a knack for getting into scrapes. A few years ago he spent three weeks in jail for obtaining the captain’s license he needed to sail his big yachts by bribing officials. He celebrated his release by ordering $3,000 worth of pizza for his cellmates. In this egalitarian country Roekke’s extravagant lifestyle has made him the darling of the tabloid press even as his aggressive business dealings attract the scrutiny of regulators.
Roekke “was the first one to bring American-style, aggressive capitalism to Norway, daring to use shareholder power to get what he wanted,” journalist and Roekke biographer Steinar Dyrnes recently told Reuters.
Roekke earned his fortune – estimated at $2.9 billion by Forbes – the hard way, leaving his native Molde, Norway in the 1970s without a high school diploma to work on fishing trawlers off the west coast of the United States. He soon moved on to refurbishing old fishing boats, and by the 1980s was investing in seafood companies, laying the groundwork for his return to Norway, where his various interests coalesced when he and a partner took control of the Aker group of companies spanning the shipping, oil and gas service, fishing, and engineering fields.
One of Roekke’s big early moves was the purchase of half of Det Norske, the first Norwegian oil company founded in 1971 at the dawn of the North Sea energy rush. His most spectacular venture came this month when Det Norske paid $2.1 billion in cash for Marathon Oil’s Norwegian assets. The Texas-based company saw the deal as a way for it to ease out of chancy exploration and production in Norway’s North Sea oilfields for the more familiar pastures of America.
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For Roekke, the deal could see him take the lead on developing one of the largest North Sea oil discoveries in decades, the Johan Sverdrup field. Centered about 90 miles west of Stavanger, when it reaches its estimated peak output of 500,000 barrels per day, Sverdrup could inject new interest in Norway’s North Sea fields, whose output has been steadily falling since the 2001 high of 3.4 million barrels per day, according to the U.S. Energy Information Administration.
The days of relatively light government oversight of the Norwegian oil industry are probably gone for good, however. Last year the government raised taxes on oil companies, a step that one analyst said could raise the break-even price of new projects by several dollars a barrel and see some projects put on hold.
This year, opposition parties in parliament proposed a scheme to power oil and gas fields from land, thus using hydropower-generated electricity to replace the high CO2-emitting on-site gas turbines typically used to power drilling rigs and other offshore facilities. Statoil, the country’s dominant oil and gas producer, warned this might mean costly delays in bringing the Sverdrup field on line.
In early June the opposition agreed to a compromise with the government that will see Statoil and other oil companies required to power three North Sea fields near Sverdrup from land starting in 2022.
“Though the final accord was a softer version of parliament’s original plan, it marked a break from lawmakers’ pattern thus far of not questioning processes inside the energy industry,” Bloomberg reported.
“People have gotten used to not having government interference in oil projects in Norway,” said the lone Green Party member of parliament, Rasmus Hansson. “Now the bigger parties see an acute need of getting out of a position of being totally attached to the oil business.”
The compromise brought relief to the industry because it means that development of Sverdrup can go ahead as planned, Platts reported. The first development phase is expected to cost some $20 billion and bring the field into production in 2019.
That can only be good news for Det Norske – and Roekke -- which wants to be a major player in Sverdrup. Overnight, the Marathon deal turned it into Norway’s second-largest oil producer whose production could eventually rise 20-fold.
By Ky Krauthamer of Oilprice.com