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My Turn: Norwegian oil wealth

Posted: March 27, 2013 - 12:04am

How the Norwegians have become wealthy from their North Sea oil fields deserves further attention in the current legislative debate about Alaska’s oil industry taxation. I’m impressed with how large Norway’s national oil revenues “savings account” has become when compared to ours. I did some limited homework about Norway‘s oil history by searching the Wikipedia (the free on-line encyclopedia) and I’d welcome some expert answers to the following questions:

How has Norway managed to create a fund, called the Norwegian Government Pension Fund now containing about $654 billion (as of September 2012) while Alaska’s Permanent Fund only contains about $42 billion (as of August 2012)? I know the federal government’s share of the Alaskan oil revenue pie, and the Alaska budget reserve fund (among other revenue receiving destinations) need to be factored in to begin to make an apples to apples comparison of these funds, but how can the roughly $600 billion difference be accounted for?

Norway’s Fund is a fund into which the surplus wealth produced by Norwegian petroleum income, mainly from the taxation of oil companies, is deposited and invested. The Fund was established in 1990 by the country’s legislature to counter the effects of the expected decline in income from its aging oil fields and to smooth out the disruptive effects of highly fluctuating oil prices.

The Norwegian Ministry of Finance forecasts that the fund’s value will reach $717 billion by the end of 2014, $1 trillion by the end of 2019 and $1.3 trillion by 2030. (Source: Wikipedia search reference - “The Norwegian Government Pension Fund - Global”)

How the Norwegians have fared should be of interest to Alaskans since their major oil fields appear to be comparable in size to Alaska’s and their oil fields development history started when ours did.

Norway’s Ekofisk oil field in the North Sea was discovered in 1971. It and several surrounding oil fields together contained about 14 billion barrels of recoverable oil. Alaska’s Prudhoe Bay oil field on the North Slope was discovered in 1968. It and two other nearby major North Slope oil fields (Kaparuk and Alpine) contained about 20 billion barrels of recoverable oil.

Production of oil in both Norway’s and Alaska’s major oil fields have peaked and are now in decline. The development of Norway’s oil fields involved the construction of many deep sea drilling and production platforms in the storm-prone North Sea. The whole complex consists of 29 platforms, with undersea pipelines for transporting the produced oil and gas to England and Germany. The development of Alaska’s oil fields involved drilling in a remote Arctic environment and the construction of the trans-Alaska pipeline system, an epic undertaking.

While I don’t know what the oil field development costs in Norway and Alaska actually amounted to, I do think the phrase “multi-billion dollar outlays” would be in the ballpark for both. (Sources: Wikipedia search references - “Eskofisk Oil Field“, “Prudhoe Bay Oil Field“ and “List of Oil Fields”) I’ve also read that Norway’s oil tax rates have been and continue to be higher than Alaska’s, even under the current Alaska law (ACES - Alaska’s Clear and Equitable Share).

There are probably good and valid reasons why Alaska either hasn’t or can’t manage its petroleum resources just like Norway has. If, however, aspects of their approach could work here, it would seem trying them out might just be in Alaska’s interest. What the Norwegians appear to have done right does make me wonder about what we Alaskans have been doing and whether the legislative proposals now being considered to change ACES are taking Norway’s example into account.

• Behnert has lived in Juneau since 1976 and worked as a natural resource planner before retirement.

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