NORWAY'S OIL BOOM

BLOOMBERG- A rally in the price of black gold is giving Norway another fix.

With crude back at $70 a barrel, and a petroleum industry that cut costs to the bone after the oil crash, the stage is now set for another boom. But the good times could hamper Prime Minister Erna Solberg's main aim of moving the economy away from a reliance on oil. As optimism now returns to the economy, signs of real progress on that project are few.

"Ideally, in terms of long-term sustainability, we would like to see a substantial increase in mainland investments, that the new industries that have lived in the shadow of the oil sector get a real boost," said Kjersti Haugland, chief economist at DNB ASA, Norway's largest bank. "Based on the macro data that we now have, we can't say that the Norwegian economy has gone through a massive transitioning."

Half the Kingdom
Offshore industry accounted for more than half of Norway's exports of goods in 2017

Norway's Petroleum Directorate now predicts oil investments will rise this year for the first time since 2014 and that output will test another peak in 2023 as new fields start pumping. The real economic risks will appear after that, if the economic transformation hasn't seen more progress. After 40 years of production, Norway's biggest oilfields are being depleted and recent exploration in its Arctic waters has been disappointing.

"We know that the force of the oil industry in the Norwegian economy has been reduced and will be lower than what we've been used to," Finance Minister Siv Jensen said in an interview this month in Oslo. "Yes, it's an important industry for Norway, but it's definitely important that we get more legs to stand on."

Mainland Momentum?
Mainland investments have had a hard time gathering pace amid oil drop

Norway was hit by an economic shock in 2014 when the price of oil more than halved in less than a year, prompting central bank Governor Oystein Olsen to warn that "winter is coming." More than 50,000 jobs were lost in the offshore sector, but the government kept the economy afloat by dipping directly into the nation's $1 trillion sovereign wealth fund for the first time to stimulate growth and plug budget holes.

The mainland economy is also dependent on currency traders. Selling off along with oil prices over the past few years, the weakening currency has been key in boosting exports.

"It's important to keep the currency fairly weak, it's a supporting factor along the way," said Haugland. "We'll see an upturn in the oil industry now, but there's no reason to expect that we'll return to the massive lift that we saw before the oil price drop."

Rising Again
Petroleum sector share of Norway's economy and state revenue is recovering

The hardest blow from the downturn was felt in the oil region stretching along the country's southwest coast. From its headquarters in the oil capital Stavanger, the region's biggest bank SpareBank 1 SR-Bank, is seeing some local companies rejigging their businesses away from oil.

For example, Statoil ASA, now plans plan to plow one third of its investments into renewable energy by 2030. "What Statoil is now doing by expanding its business model is interesting, it's easy to look at Norway as an oil and gas nation, but we're really an energy nation," said Kyrre Knudsen, chief economist at SpareBank 1 SR-Bank.

Also searching for more legs to stand on is a company like Coast Center Base. Established at the beginning of the Norwegian oil adventure in the 1970s, the company has catered to offshore operations by supplying goods and repairing rigs. It's now looking to get into businesses such as carbon capture and wind power.

"Instead of fighting against changes, you need to swim with the current," Kurt Rune Andreassen, the company's chief executive officer, said in an interview this month.

The head of lending to large companies at DNB says the last few years should be viewed as a wake-up call.

"I think in many ways that the oil price drop three years ago was a blessing in disguise," Harald Serck-Hanssen said in an interview. "It gave us a warning of how it will be like living in a less oil-dependent economy, and it gave many companies the opportunity to adapt."

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Earlier:

2018, January, 24, 11:30:00 NORWAY'S OIL UP OF 26 TBD NPD - Preliminary production figures for December 2017 show an average daily production of 1 932 000 barrels of oil, NGL and condensate, which is an increase of 26 000 barrels per day compared to November.

2018, January, 4, 12:20:00 NORWAY'S GAS RECORD REUTERS - Norway’s pipeline gas exports to Europe hit a record high in 2017, exceeding the previous year by almost 7 percent, preliminary data from the country’s offshore gas systems operator Gassco showed on Tuesday.

2018, January, 3, 15:35:00 NORWAY'S OIL PROBLEMS BLOOMBERG - Norway’s oil production has been halved since a 2000 peak. While natural-gas output has surged, total production is forecast to fall again in the middle of the next decade. A flurry of investment decisions at the end of last year hides a painful truth: after Statoil’s $6 billion Johan Castberg oil field starts production in the Barents in 2022, the project pipeline is scant.

2017, December, 20, 19:10:00 NORWAY'S FENJA INVESTMENT NOK 10 BLN NPD - On Tuesday, the licensees, led by operator VNG, submitted a Plan for Development and Operation (PDO) for Fenja in the Norwegian Sea. Investments are expected to total approx. NOK 10 billion.

2017, November, 22, 11:20:00 NORWAY'S PRODUCTION UP TO 1.9 MBD NPD - Preliminary production figures for October 2017 show an average daily production of 1 901 000 barrels of oil, NGL and condensate, which is an increase of 141 000 barrels per day compared to September.

2017, November, 20, 09:00:00 NORWAY SELLS OIL & GAS Norway, which relies on oil and gas for about a fifth of economic output, would be less vulnerable to declining crude prices without its fund investing in the industry, the central bank said Thursday. The divestment would mark the second major step in scrubbing the world’s biggest wealth fund of climate risk, after it sold most of its coal stocks.

2017, August, 31, 12:10:00 U.S. WANT NORWAY Norway’s $970-billion sovereign wealth fund, the world’s largest, should allocate a bigger share of its investments to renewable energy to boost returns, a U.S. energy policy think-tank said