Norway’s vast oil wealth has insulated it from the financial crisis. But problems abroad have still affected its economy. DAVID ROBINSON reports.
The after-effects of the huge oil spill in the Gulf of Mexico look likely to spread far beyond the Louisiana coast.
The disaster has added an extra dimension to an already bitterly divisive debate among Norway’s three-party ruling coalition over whether it should allow deep-water drilling around the Lofoten and Vesterålen islands, to the north of the country.
The seas around islands are the spawning ground for the Northeast Arctic cod, the largest remaining stock in the world, in addition to a large number of killer and sperm whales.
But the area also holds an estimated 1.3 billion barrels of oil and natural gas.
Norway is the world’s fifth largest oil and third largest gas exporter. But it also sees itself as a world leader in environmental policies.
Opponents of deep-water drilling around the Lofoten and Vesterålen islands argue it could create an environmental catastrophe similar to the Gulf of Mexico spill.
The debate over whether to allow drilling has divided Norway’s three-party ruling coalition. The leading Labour Party – led by Prime Minister Jens Stoltenberg – is split over the issue, while the Centre Party and Socialist Left are officially against opening the territories.
“It’s a huge topic of discussion at the moment,” says Jacob Sverdrup Bjønness-Jacobsen, a partner at Oslo-based law firm Grette. “There are a lot of fishery interests [around the Lofoten and Vesterålen islands]. There are also a lot of environmental issues. It’s a vulnerable area. It also has a tourist industry, which is important for the country as a whole.
You have these competing interests. “[Prime Minister Jens] Stoltenberg is in favour of drilling. But his colleagues in the coalition government are hesitating and there is a conflict between the coalition partners.”
The impasse could create work for Grette, whatever happens. “We have an oil and gas department that is expanding, but we also have an environmental working group. We can cover both sides. “Should drilling go ahead it will create a lot of work, but which businesses get these opportunities is highly uncertain; there will be a lot of competition.”
Given Norway’s abundance of natural resources, it’s unsurprising that a lot of law firms’ work is connected to the oil sector. “The real estate markets, the service markets, as well as traditional Norwegian industry are all very oil-driven. A lot of work is not necessarily directly related to oil business, but is affected by the price of oil.”
Unsurprisingly, the period in 2007-08 when the price of oil soared to a record $140 a barrel created an abundance of business activity and legal work. “It was a hilariously good time,” Bjønness-Jacobsen says.
“For eight years law firms were growing, but recently they haven’t been. The legal sector, as with other sectors in Norway, has suffered a great deal in the last two years.”
The business environment remains solid, but is still a world away from those heady days. “The industrial and the service sectors are extremely important to the national economy. They have been in crisis, because it has been a period where new vessels have not been ordered. Therefore there has been limited
demand for engines, gears and other components. The situation facing the general shipping industry is quite difficult,” Bjønness-Jacobsen says.
“The oil sector has been hesitant to invest. There have been extreme fluctuations in investment. It’s created a very unstable market and Norway has suffered because of that.”
Of course, Norway’s vast natural wealth – it produced 2.4 million barrels a day in 2008 – has seen it suffer less than most other countries during the financial crisis. But as Bjønness-Jacobsen points out, “we have been affected by others’ suffering.” Last year, Norway’s economy contracted by 1.1%.
“I work with international financers in the building sector equipment market. But because of the financial turmoil and the difficulties in funding related to the US market they aren’t in a position to sell their equipment. “That’s a kind of crisis because the market wants buildings, and entrepreneurs need equipment because activity is increasing. But it’s not possible to get financing. It’s not a domestic Norwegian problem. It’s related to the turmoil in the financial sector in the US.”