CALGARY — Norway’s move to stimulate its oil and gas industry with tax breaks and new exploration blocks in the Arctic after its sovereign wealth fund divested from Canadian companies has once again angered Alberta’s politicians.
“It’s hypocritical to try to drive investments away from a competitor here in Canada… and at the same time aggressively pursue increased production in Norway,” Alberta Energy Minister Sonya Savage said in an interview with the Financial Post on Thursday.
This week, Norway’s government cut taxes for the country’s oil and gas industry in a bid to reduce break-even costs there by 40 per cent and stimulate investment in the sector. It is seen as an incentive to attract oil majors to the Norwegian Continental Shelf.
Rystad Energy, an Oslo-based energy research firm, said in a release the move would help 36 projects including some by Norway’s state-controlled oil producer Equinor ASA (formerly Statoil ASA) as well as majors such as Royal Dutch Shell Plc and ConocoPhillips. All three companies have divested all or parts of their oilsands assets in recent years.
In addition, Norway’s government also opened up new areas for offshore oil exploration this week, including 125 blocks in the Barents Sea — in a relatively untouched portion of the Arctic.
The Norwegian Petroleum Directorate aims to expand the country’s oil output by 43 per cent over the next five years to 2.02 million barrels per day by 2024, up from a 30-year low of 1.41 million last year.
The expansion comes after the country’s US$1-trillion sovereign wealth fund — the largest in the world — announced in May that it was selling stakes in Suncor Energy Inc., Canadian Natural Resources Ltd., Imperial Oil Ltd. and Cenovus Energy Inc., apart from a handful of international oil companies and coal-fired power companies, over concerns about emissions.
Savage said Norway’s sovereign wealth fund dumped its holdings in four of Alberta’s largest companies — exacerbating liquidity concerns here — over climate change concerns earlier this year. “It’s more than a disconnect. It’s hypocritical,” she said.
Public opinion in Norway is divided between those who want to see Western Europe’s largest oil-producing country diversify into other industries and those who are focused on stimulating the economy and supporting local jobs, said Marius Kluge Foss, principal with Rystad.
We are bragging about being a green country … but we are very reliant on the income from oil and gas
Marius Kluge Foss, Rystad Energy
“We are feeling the dilemma,” Foss said in an interview. “We are bragging about being a green country and bragging about producing all of our electricity from hydro-power and have the highest proportion of electric vehicles, but we are very reliant on the income from oil and gas.”
There is more agreement within the country over Norges Bank’s decision to divest its holdings in oil and gas producing companies.
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Foss said Norwegians were supportive of divestments from the sovereign wealth fund primarily because the country’s economy is already focused heavily on oil exploration. “Being that dependent on fossil fuels in our own economy, it makes a lot of sense to diversify,” he said.
As Norway’s sovereign fund sold off shares in Canadian oilsands producers, another major oil producing country’s sovereign wealth fund used the coronavirus pandemic-induced downturn to buy up shares in those same companies.
Saudi Arabia’s US$320-billion Public Investment Fund bought shares in Suncor and Canadian Natural during the energy market collapse and now ranks as the eighth-largest Suncor shareholder and 14th-largest shareholder in CNRL, according to a Bloomberg news report.
Albertans frequently compare their own economy and public finances with Norway as the two places have a similar population base and a large endowment of natural resources.
The fascination with Norway has only increased as successive governments since the 1990s have reduced payments into the province’s Heritage Fund, while Norway’s sovereign wealth fund continued to grow.
Last week, the Alberta government tapped former Canada Pension Plan Investment Board CEO Mark Wiseman to chair the board of the Alberta Investment Management Corp., which manages the Heritage Fund.
AIMCo has come under fire in recent months for losing $2.1 billion in high-risk volatility trades linked to oil prices, which led analysts to question why the oil-and-gas-dependent province’s public pension assets weren’t invested in a more diverse range of assets.
As other oil producing countries develop incentives for their own sector, the federal and government is also looking to boost the industry.
Federal Natural Resources Minister Seamus O’Regan said Monday that financial help from the Business Development Bank of Canada and Export Development Canada, apart from programs to help bigger producers, are important to boost the sector.
Work is ongoing with the federal government on liquidity programs aimed at helping Canada’s domestic oil industry, Savage said. To date, only a few energy companies, including Athabasca Oil Corp., have announced their intention to use the loan programs, but none of the money has been allocated.