The ripples from the Deepwater Horizon disaster in the Gulf of Mexico have reached Norway.
Norwegian opponents to opening the fragile ecosystems around the Lofoten Island with their critical spawning grounds for cod to oil drilling are arguing that Norway needs to delay any decision until the country fully considers the lessons from uncontrolled oil release off the coast of Louisiana.
The oil industry estimates that there are 1.3 billion barrels of oil in the reserves around the islands. Production from those reserves will help offset declining production from Norway’s mature North Sea fields.
More is at stake that just those 1.3 billion barrels.
Norway resolved a longstanding ocean-border dispute with Russia in April. That plows the way for opening potential reserves in the icy Barents Sea and Arctic Ocean for exploration and development.
Norway already has some of the strictest oil drilling standards in the world—for example, its rules on blowout preventers would likely have resulted in an automatic shutdown of the Deepwater Horizon well—but the oil industry and its critics both acknowledge that oil exploration in the difficult to access and very stormy waters of the Arctic continental shelf present new and not fully understood challenges. With current technology a clean-up of a major spill in those waters is probably impossible.
The government of Prime Minister Jens Stoltenberg is divided over whether or not to open the Lofoten Islands area to development and has just begun to consider the problems raised by oil exploration in Arctic waters.
Way back in September 2009 I added Statoil (STO) to Jubak’s Picks because I thought that elections in Norway had raised the odds in favor of oil development in the Lofoten Islands and further north. I sold shares of Statoil when the entire oil sector was sent reeling by the Deepwater Horizon disaster and not because I had the foresight to see that what happened in the Gulf of Mexico would change drilling plans in Norway. But if I still held Statoil shares, I’d most certainly sell them now on this news. (For my original take on Arctic oil exploration by Statoil see my post http://jubakpicks.com/2009/09/23/buy-statoil-hydro-sto/ )
It’s just too hard to invest in oil stocks right now. The consequences of the Deepwater Horizon explosion and oil release are extremely difficult to anticipate.