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Norwegian government open to continued oil exploration

Norway's Oil and Energy Minister Terje Aasland says that, in the long term, in light of the current energy and security situation in Europe, there are increased opportunities related to oil exploration in the Barents Sea.

Published: 27 November 2022 16:06 CET

Oil transport

Norway has become the largest exporter of gas to Europe after Russia cut off its gas supply. Photo by Emmaus Studio / Unsplash

The Norwegian government has an agreement with the Socialist Left Party (SV) that the 26th licensing round for oil exploration will not be launched this year.

Still, Minister Aasland told the newspaper Dagens Næringsliv (DN) that he is open to issuing a call for new blocks next year.

“The Norwegian continental shelf is much more attractive now. The Norwegian continental shelf plays a much larger, more important role for European energy security (now) than ever before,” Aasland noted.

The war in Ukraine

Norway became the largest gas exporter to Europe after Russia cut off its gas supply.

“I believe that the opportunity in the Barents Sea in a long-term perspective has been strengthened through the situation that we are experiencing.

“The need for gas has not diminished with the situation that has unfolded with the war in Ukraine…

“I feel that the European Union (EU) wants Norway to develop its oil and gas activities further, (so that it can) be a stable and long-term supplier of gas,” Aasland added.

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High interest rates unlikely to strengthen weak Norwegian krone

Lower interest rates have been pointed to as a factor, contributing to the Norwegian krone is at its weakest level against the euro, dollar and pound for several years.

Essentially, interest rates in Norway are lower than in other countries, which makes the krone less attractive to investors.

READ ALSO: What is making the Norwegian krone so weak?

On Thursday, Norges Bank raised the key policy rate to three percent, and analysts forecast that the central bank’s interest rate will be between 3.5 and 3.75 percent by the autumn.

While low-interest rates have contributed to a week krone, the higher interest rates are unlikely to do much to help strengthen Norway’s ailing currency, financial experts have said.

“I do not believe that Norges Bank, through the interest rate differential, will be able to secure a stronger krone exchange rate over time,” Kjetil Martinsen, the chief economist for Swedbank, told business news publication Finansavisen.

Harald Magnus Andreassen, the chief economist at SpareBank 1 Markets, told the same publication that the bank would need to raise its rates much higher to tip interest rates in favour of the krone.

“If Norges Bank were to save inflation by strengthening the krone exchange rate, they would have to raise interest rates by 150-200 basis points more than they have in the interest rate range now. We are therefore talking about a policy interest rate of over five percent, and it is not certain that it would even help,” he explained.

He added that the world going green made it harder for the currencies of countries whose economies revolve around the sale of commodities. For example, Norway itself is heavily dependent on oil and gas sales. Historically, as oil prices have risen and fallen, so has the krone.

READ MORE: How long will the Norwegian krone remain weak?

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