Norway down but not out in oil slump

Tommy Gronnestad says he's glad he chose a career in tourism. Photo / Grant Bradley

Lower prices are taking their toll but the Scandinavian nation insists it's in the business for the long haul.

At Bergen harbour, there's a forlorn look about the oil service ships tied up bow to stern.

These big vessels normally work shifting anchors for offshore platforms, transport heavy gear and provide emergency backup for the rigs, but the prolonged downturn in oil prices means demand for their services has plummeted.

As with the impact of the dairy downturn in New Zealand, the oil hit for Norway is hurting.

Early last month, 300 workers were laid off from one platform support company in Bergen. Further south in the heart of the oil service industry, at Stavanger, thousands have lost their jobs.

Tommy Gronnestad, 19, has a job aboard a tourist vessel which cruises the fiords around the town and says he's pleased he didn't choose to work in the oil industry.

Like many young Norwegians, he got a taste of the sector while still at school, working for a month aboard a rescue ship hovering alongside a rig on the Norwegian continental shelf. He opted for a job in tourism instead, and has heard service vessels have cut their daily rates to a third of what they were a year or so back.

"If you lose your job in the oil industry you have to go to the NAV [the Norwegian welfare office]. You might have to sell your house or your car," he says.

Robort Kristensen worked in the oil industry for 30 years until last year, mainly on rigs far off Norway's coast.

He worked for Halliburton for 29 years until 2013 when he changed to another company, Baker Hughes. That ended badly when prices tumbled last year.

"I was the last one on and the first one off," he tells the Herald from his Stavanger home.

He says workers are paid around US$100,000 ($146,000) for four months' work, doing 12-hour days.

"Some drink, others go travelling, I kept working," he says. That work at home paid off. Tinkering with charging devices for electric cars means his services are in demand for a post-hydrocarbon future that is developing quickly in oil export-focused Norway.

Outdoor education student Cecilie Bjoernstad says she felt the impact of what Norway's Oil Minister described as a crisis in the industry while at summer school in Germany. Her Norwegian currency, the krone, didn't go as far as she had expected.

"It's [oil] not something we think of very often -- it's just times like that," says the 28-year-old.

Global oil prices which were above US$100 a barrel in the middle of last year fell below US$50 in December and haven't really recovered. That's biting throughout the Norwegian economy, where GDP growth is forecast to slide from 2.3 per cent last year to 1.25 per cent this year.

Unemployment is heading to 4.5 per cent from historic averages of 3 per cent and the krone is down 13 per cent over the past 12 months.

Taxes collected on oil extraction reached US$28 billion in the first three quarters of the year, down from US$48 billion in the same period a year earlier, according to Statistics Norway. This in a country where a late 1950s survey of the Norwegian continental shelf discounted the possibility of finding any oil there.

Ole Anders Lindseth, director-general in the department for oil and gas in the Norwegian Ministry of Petroleum and Energy, says despite the comparatively low prices, there is interest in acquiring permit areas.

Oil rig support vessels tied up Begen, Norway. Photo / Grant Bradley

Early last month, a round of applications for relinquished areas had more than 40 applicants.

"The industry wants to do things cheaper and smarter now - we have to deal with a period of capital constraints and at the same time we need to make sure we have ample opportunities for when we get back on the track again of normal prices." The 40-year industry veteran has seen four big price dips before.

"We don't freak out because we are running operations, running production and we will continue to produce about two million barrels a day for many, many years," says Lindseth. (In 2013, New Zealand produced about 35,000 barrels a day.)

"We have produced half of what we have or expect to have. In other words, we are in this for the long haul."

And right now, Norway is pumping the gas in record volumes to customers in Europe, to help make up for lower oil receipts.

The International Energy Agency forecasts that by 2040, energy demand will probably increase by close to 30 per cent, with oil demand up around 10 per cent on today.

"This notion that the renewable world is only a couple of political decisions away is not the case, but considerable efforts must be made to increase the share of renewables," Lindseth says. "The temporary challenge is the oil price but that is most harmful to new investments -- you may see some delays but still we have 14 projects under development. The idea is to plan for the future."

Even for Norway's oil giant, Statoil, part of that future is renewable. It has just set up a renewable energy division that reports to its chief executive and has stakes in wind farms, including one off the coast of England. The government has for years subsidised electric cars and the country now has the world's highest per capita rate of electric car ownership. But Lindseth still sees a big future for oil.

"The oil price will come back at a higher level but it is very important that in this process the companies are able to reduce costs."

This would include cutting red tape that has grown "tremendously" in Norway. He cites the example of 80-page tender documents to provide medical kits for offshore rigs that have supplies easily bought over the counter. "Without compromising safety, you could look at whether all the demands for documentation and specifications are really necessary."

He doesn't have an average figure for the cost of producing a barrel of oil on Norway's continental shelf, but says some projects still make money at oil prices of US$25 to US$30.

Lindseth says Norway has a policy of not flaring gas (burning off what is sometimes the unwanted byproduct of oil) but rather pumping it back into fields to keep up pressure and avoid environmental damage. The country is also moving towards powering offshore installations using renewable electricity from the mainland or windmills on rigs.

As in New Zealand with dairy prices down, tourism is growing in importance in Norway.

Linn Kyos Falkenberg is the marketing co-ordinator for the Bergen Tourism Board. This historic town at the gateway to the fiords has always been popular but it's getting busier as Norwegians stay at home and more foreign visitors are attracted as the krone falls.

This more than makes up for the downturn in business travel by the oil industry, she said.

Greenpeace Norway spokesman Martin Norman says he's at a loss as to why New Zealand is so keen on deep-water drilling.

"I don't see why New Zealand's pursuing and opening up new areas for oil; it's going to be very expensive no matter what methods you're using," he says. "You're going to have to have an oil price where the tax take will be so low that it's no longer worth it for the country.

"The oil era is over. It's not going to be shut down tomorrow but the signs are obvious that we've found more fossil fuel than we can burn. A lot is easily accessible, high-quality oil."

? Grant Bradley travelled to Norway with the assistance of a Royal Norwegian Embassy media grant.