According to a bombshell report by Norwegian national broadcaster NRK, the Ministry of Petroleum and Energy knew already in 2013 that oil exploration in the southeast Barents Sea could lead to substantial losses, yet withheld its calculations from parliament.
Among others, the Energy Ministry concluded that if the oil price fell by 30 percent, the entire southeast part of the Barents Sea would turn “red”, financially speaking. Even with oil prices rising to $120 a barrel, there was a 25 percent chance that the resources would become unprofitable. Instead, however, the parliament was informed that the oil in the area could be worth between NOK 50 and 280 billion ($5.5-30.5 billion) without any reservations. This calculation was predicated on the assumption of record high oil prices of $120 per barrel being sustained for the next 20 years, before an oil price crash in late 2014.
The information provided in the 2013 report only surfaced seven years later, which led to parliament, oblivious of the entire picture, unanimously backing oil exploration in the southeast part of the Barents Sea in 2013. Nor was it revealed when the district court and the court of appeal were to hear the climate lawsuit against the state, NRK stressed.
Several professional economists within in the ministry reportedly protested against the handling of the issue, but were ignored by the Ministry of Petroleum and Energy. Law professor Hans Petter Graver of the University of Oslo argued that several offences may have been committed in the process.
“This is sensational and completely unparalleled information. One inevitably wonders whether this was a deliberate omission. It is almost unbelievable that the ministry has kept both parliament and the courts in the dark, even if this was due to a mistake,” Graver told NRK.
By contrast, then-Energy Minister Ola Borten Moe of the Centre Party, countered that parliament received all relevant information. This view is not shared by Greenpeace Norway.
“The parliament was deceived and made a decision on the wrong basis. What emerges now, seven years too late, is a scandal. Norway can lose billions on oil extraction, and taxpayers are left with the bill,” Frode Pleym, the leader of Greenpeace Norway, said.
Between 2005 and 2013, Norway was ruled by a coalition between Labour, the Socialist Left and the Centre Party, led by then-Labour leader Jens Stoltenberg.
Norway remains one of the world leaders in exports of energy resources, covering about 2 percent of global oil demand and 3 percent of natural gas demand. Most of the oil and gas output from the Norwegian shelf is exported as the most important commodities in the Norwegian economy. Owing to its oil and gas prospects Norway has established the world's biggest sovereign wealth fund worth over $1 trillion.
Exploration in Norway benefits from favourable fiscal terms in which oil companies are entitled to a tax refund of 78 percent of drilling costs, borne by the taxpayer.