• The Oslo government will auction up to 136 new oil and gas exploration blocks
  • Norway is already western Europe’s largest oil producer
  • Environmentalists are outraged by Norway’s deeper foray into the Arctic

Despite persistently low crude prices and its stated objective to fight climate change, Norway is planning to greatly expand its oil exploration activities in the Arctic Ocean.

Specifically, the Oslo government will auction up to 136 new oil and gas exploration blocks, with 125 of those blocks located in the Arctic Barents Sea, off the northern coast of Norway.

This round of licensing was delayed by arguments about how far north oil companies could be allowed to drill.

Tina Bru, Norway’s minister of petroleum and energy, said the expansion was necessary to create jobs and generate wealth.

“We need new [oil] discoveries to uphold employment and value creation,” Bru said.

She added: "Regular access to new exploration acreage is crucial to maintaining activity on the Norwegian continental shelf. By initiating the 25th licensing round, while we have the annual allocations in [mature] areas, the oil and gas industry gains access to acreage in both lesser-known and well-known areas."

Norway is already western Europe’s largest oil producer and has amassed the world’s biggest sovereign wealth fund, valued at more than $1 trillion.

Norway, a party to the Paris agreement on global warming, has promised to reduce carbon dioxide emissions.

As such, environmentalists are outraged by Norway’s deeper foray into the Arctic.

“This clearly shows the Norwegian government’s actions are not based on what is scientifically required to address the climate crisis,” said Greenpeace’s chief in Norway, Frode Pleym. “Norway has failed to take the climate crisis seriously.”

In recent years, some of the world’s largest oil companies including Royal Dutch Shell (RDS-A), ExxonMobil (XOM) and Total (TOT), ceased oil explorations off Norway’s coast since most discoveries have either been dry or too small.

“This is a special invitation to [the] supermajors to return back to the [Norwegian Continental Shelf],” said Per Magnus Nysveen, head of analysis at Rystad Energy, an Oslo-based consultancy. “The exploration potential of the Barents Sea is still huge, despite a negative trend for the most recent exploration wells.”

Norway’s oil ministry thinks the frontier regions are the most likely to deliver large new discoveries.

According to the Norwegian Petroleum Directorate, a government agency, Norway has thus far produced 48% of the recoverable resources on the shelf -- meaning more than half of available reserves are still untapped.

The Petroleum Directorate also estimated that the Barents Sea holds up to 3,079 billion standard cubic meters of oil equivalents, of which only 87 million cubic meters has so far been produced.

Nonetheless, Norway plans to reduce its oil production by the end of the year due to the weakness in oil prices.

After the huge Johan Sverdrup oil property and the new Johan Castberg oilfield reach peak production in a few years, Norway’s oil production will decline naturally after 2023 in the absence of any significant new discoveries.

Thus far, explorations in the Barents Sea, where little infrastructure exists, have been disappointing.

The Johan Castberg field, operated by Norway’s Equinor (EQNR), is located in the region and is not due to come onstream until 2022. Equinor also operates the Snohvit gas field, the first offshore development in the southern Barents Sea -- and also holds a stake in the Goliat oil field. These are the only producing fields in Norway's Barents Sea.

"The last few months have been particularly challenging, both for oil companies and the supply industry," Bru said. "It is important not to lose sight of the more long-term prospects."