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Norwegian oil production peaked in 2000 to 2001; gas production may be peaking about now. Oil hit a low in 2013 and then recovered towards a new local peak, probably concurrent with the gas.

drilling and development

The most surprising thing I find with their industry is that the drop in oil price made almost no difference the drilling activity shown here (all data here and below taken from the NPD – Norwegian Petroleum Directorate – which provides more data than just about any other such organisation).

chart/

The chart shows numbers of wells drilled, as stacked bars, and number of operating rigs (unstacked) against the left hand axis, other curves are ratios of total against the right axis. There was a high level of drilling activity in 2013 and 2014 which then actually increased in 2015 and was still high in 2016, although exploration well numbers look to be decreasing now. This may be just a consequence of the momentum built up in the high price years, or because of the influence of Norwegian regulatory regime (which has always sought to smooth out development activity, though less so recently with new Conservative governments), or a move to new frontiers in the Norwegian and Barents Seas (the background area chart shows proportion of wells in each sea). The development wells marked N/A (information not available) are probably mostly oil judging by the fields being drilled, the non-production wells are mostly injection with a few for observation and disposal. The number of rigs and proportion of dry wells have remained pretty steady, as has the proportion of subsea wells.

…click on the above link to read the rest of the article…

Inside The World’s “Doomsday Vault”

April 16, 2017

Inside The World’s “Doomsday Vault”

Imagine that the unthinkable has happened. A massive asteroid impact triggers a “nuclear winter” effect, or one of the world’s most dangerous supervolcanos erupts. Maybe Donald Trump gets in an epic Twitter feud with Kim Jong-Un that initiates World War 3. Either way, things are going sideways, and the fate of human civilization itself is at stake. Will everything be lost? Visual Capitalist’s Jeff Desjardins explains…

ENTER THE ‘DOOMSDAY VAULT’

Well, besides the fact that the world’s cities have been replaced by smoking craters, there is some good news for the humans that survive a potentially apocalyptic scenario.

On a remote island that is just 800 miles (1,300 km) from the North Pole, the Norwegian government has built a failsafe in the freezing cold that protects thousands of the most vital crops from extinction. Officially called the Svalbard Global Seed Vault, it already holds close to a million samples of crops around the world, with each sample holding about 500 seeds.

Today’s infographic, from Futurism, has more on this Doomsday Vault that could one day help to save civilization:

Courtesy of: Visual Capitalist

Are 100-Year Mortgages Next? Effects of Negative Real Interest Rates on Nordic Housing Bubble

March 5, 2017

Are 100-Year Mortgages Next? Effects of Negative Real Interest Rates on Nordic Housing Bubble

Wage Growth vs. Housing Price Growth

By Nick Kamran, an American living in Oslo, Letters from Norway:

Historically, central banks throughout Europe had one mandate: price stability. They did not worry about employment or economic growth, only currency integrity. Setting interest rates to contain inflation ensured that a Krone or a Euro would purchase tomorrow what it could today. Nevertheless, since the ebbing of the 2008 financial crisis, The ECB, of which Finland is a member, officially added full employment and economic growth to their mandate. The Norwegian, Swedish, and Danish Central Bank’s followed suit, stating that they would consider “other factors” than inflation when basing an interest rate decision.

Hence, instead of remaining impartial — leaving it to lawmakers, markets, and the public to deal with the prevailing interest rate — the central banks became involved in policy making. Adding employment and economic growth to their mandate equates to the National Institute of Standards changing the definition of the meter to help an engineering firm, working on a major bridge project, meet budgetary and timeline constraints. In addition to creating a dilemma, the additional mandates made central banks appear politically biased.

The Conundrum

In an attempt to balance, what central bankers perceive as two opposing forces, inflation and unemployment, they chose economic stability over maintaining price stability. The other option, raising rates would have led to greater short-term unemployment. The central banks pushed benchmark rates all the way down, nearing zero in Norway (.5% – Key Policy Rate ) and Denmark (.05% – Discount Rate), hitting it in Finland (ECB at 0% – Refi Rate) and going negative in Sweden (-.5% – Repo Rate).

…click on the above link to read the rest of the article…

Norway Doubles Down On Arctic Oil

February 20, 2017

Norway Doubles Down On Arctic Oil

While Canada and the U.S. ban Arctic drilling for oil and gas motivated by environmental concerns, and majors such as Shell pull out of their Arctic projects due to financial pressures, Norwegian energy companies are planning to increase drilling in the country’s Arctic shelf in the Barents Sea.

It seems that the limited oil price increase that followed OPEC’s production cut deal has been enough for Statoil and Lundin to decide to allocate more funds to Arctic drilling, especially since the price rise has been accompanied by a major discovery for Lundin and a likely future major discovery for Statoil.

Lundin announced earlier this month that it had struck a deposit holding between 35 and 100 million barrels of oil equivalent in its Filicudi prospect in the southern Barents Sea. According to the company, which is exploring the prospect in partnership with Aker BP and Dea, Filicudi may contain as much as 700 million barrels of oil equivalent.

Statoil, for its part, is gearing up for a major drilling campaign focusing on what could turn out to be the largest field in Norway’s Arctic shelf: the Korpfjell field. Dubbed an elephant, Korpfjell may hold up to 10 billion barrels of crude, not least because of its immediate proximity to another promising deposit, the Perseevsky oil prospect in the Russian section of the Arctic. Perseevsky is being explored by Rosneft in partnership with Statoil.

Naturally, there is major environmental opposition to this Arctic foray: Greenpeace, Bloomberg recalls, last year launched a lawsuit against the Norwegian government for awarding exploration licenses in the Barents Sea. The case will be heard this fall.

…click on the above link to read the rest of the article…

Toronto’s land transfer tax revenue is booming, but the cupboard’s still bare

September 17, 2016

Toronto’s land transfer tax revenue is booming, but the cupboard’s still bare

‘The message to Toronto is, ‘Don’t spend it all,’ economist says

Toronto's red-hot real estate market has sent municipal land transfer tax revenues soaring. But the city's spending all that money, not saving it.

Toronto’s red-hot real estate market has sent municipal land transfer tax revenues soaring. But the city’s spending all that money, not saving it. (Sean Kilpatrick/Canadian Press)

In times of plenty, it can be easy to forget there may be leaner years ahead.

But Toronto city council and its city managers need only look westward for a cautionary tale about relying on a volatile source of revenue; here, it’s the municipal land transfer tax — but in Alberta it was oil.

Plunging oil prices have taken their toll on provincial revenues — down to $1.4 billion this year, from a high of more than $10 billion. That’s a glimpse of what could happen in Toronto when the housing bubble eventually bursts, real estate economist Frank Clayton says.

Unless, however, we choose to follow Norway’s example.

City Manager Peter Wallace says that the municipal land transfer tax is a volatile source of revenue – and the city shouldn’t count on it indefinitely. (CBC)

The Norwegian path

The oil-rich Scandinavian country has invested its energy revenues in a sovereign wealth fund since 1996, which now tops more than $1.158 trillion. Typically, the government can draw up to four per cent from that fund each year, slightly more than its annual 3.7 per cent rate of return, according to Norges Bank Investment Management.

And when the economy dipped last year, the country weathered it easily, taking its first-ever capital transfer from what Clayton dubbed its “rainy day fund”.

“So now that oil prices have gone down, Norway’s got assets and it’s producing income,” the Ryerson University professor said. “So the message to Toronto is, ‘Don’t spend it all.'”

…click on the above link to read the rest of the article…

European Natural Gas Prices Collapse, as US Exporters Try to Muscle in on Russia, Norway, Qatar

May 18, 2016

European Natural Gas Prices Collapse, as US Exporters Try to Muscle in on Russia, Norway, Qatar

US LNG exporters against the low-cost producers

Oil and natural gas producers cannot catch a break of late it seems. A few years after the onset of the natural gas glut, Europe is experiencing a similar phenomenon with Russia and Norway using tactics akin to those used by the Saudis with oil.

The result is rock bottom prices on natural gas that are benefiting utility companies across the continent. The effective result of these actions is also hitting LNG terminal development economics in the U.S. and minimizing growth of imports from Qatar.

In a remarkable development, gas in the UK has fallen 37 percent in the last year just as Cheniere Energy has started offering exports of U.S. LNG to Europe. While Russia and Norway both deny specifically targeting market share through their business approach, it is clear that national firms in both countries are low cost producers that are proving to be the last men standing as prices continue to tumble.

Neither country’s producers need to take specific actions to drive market share – all they have to do is be willing to sell at the market’s defined prices and as those prices fall, natural volume declines from other producers leads to increased share.

While there are still geopolitical reasons to avoid buying Russian gas, increasingly European firms are finding themselves choosing between a more expensive but politically palatable supplier in the form of the U.S., and the cheaper Russian suppliers. This dichotomy is becoming increasingly untenable for many buyers who would otherwise prefer to buy from the U.S.

…click on the above link to read the rest of the article…

Norway’s Interest Rate Conundrum

March 12, 2016

Norway’s Interest Rate Conundrum

Current Situation

The ECB recently stimulated more than expected, cutting rates by five basis points and expanding quantitative easing. It is already expected that Norges Bank (The Norwegian Central Bank) will cut rates next week, seeing accelerating inflation as temporary. They have a 2.5% inflation target mandate “over time,” giving them lee-way. They see demand falling off while the local economy, driven by exports, recovering. Therefore, they feel that they can cut rates. My previous articles challenged the assumptions that the oil sector will recover, showing that new technology reduces long term prices below offshore break-even points, and exports can make up the difference, illustrating that key sectors, like fishing, can be replicated in Canada, Maine, Russia and Japan.

We are experiencing 1970’s style stagflation, coming from the supply side, not demand. Prices are going up because Norges Bank continues to destroy the Norwegian Krone, turning it into the Nordic Peso. This is where they are “hiding” the damage to save rest of the economy. For example, housing prices will rise in NOK but fall in USD or gold (universal commodity) terms. It’s a shell game, leading to long term decline or even worse, an unexpected period of elevated inflation, requiring a rapid rise in interest rates. Housing remains at risk in this situation (Norway does not have 30 year fixed loans, most people float monthly).

I am in no position to stop them from making trips to Thailand, fruit from Spain and iPhones from California more expensive, but at least I can share my knowledge with others.

The dashboard, above, lines up key figures, showing how low rates drive inflation, gradually eroding public wealth. It is important to notice that inflation is much higher than interest paid at the bank, punishing responsible behavior. A person’s savings diminishes over time in terms of purchasing power.

…click on the above link to read the rest of the article…

Why Helicopter Money Can’t Save Us: We’ve Already Been Doing It For 8 Years

March 7, 2016

Why Helicopter Money Can’t Save Us: We’ve Already Been Doing It For 8 Years

There’s a lot of talk going around these days about “helicopter money.”

For those unfamiliar, it’s billed as a kind of last Keynesian resort when ZIRP, NIRP, and QE have all failed to boost aggregate demand and juice inflation.

For instance, HSBC said the following late last month: “If central banks do not achieve their medium-term inflation targets through NIRP, they may have to adopt other policy measures: looser fiscal policy and even helicopter money are possible in scenarios beyond QE and negative rates.”

And here’s Citi’s Willem Buiter from Septemeber: “Helicopter money drops would be the best instrument to tackle a downturn in all DMs.”

So what exactly is this “helicopter money” that is supposed to provide a lifeline when all of central banks’ other forays into unconventional policy have demonstrably failed? Well, here’s Buiter to explain how it works in theory (this is the China example, but it’s the same concept everywhere else):

Now whether it’s “fiscally, financially and macro-economically prudent in current circumstances,” (or any circumstances for that matter) is certainly questionable, but what’s not questionable is that it is indeed feasible.

How do we know? Because we’ve been doing it for 8 long years.

If you think about what Buiter says above, it’s simply deficit financing. The government prints one paper liability and buys it from itself with another paper liability that the government also prints.

Sound familiar? It’s called QE.

The first-best would be for the central government to issue bonds to fund this fiscal stimulus and for the PBOC to buy them and either hold them forever or cancel them, with the PBOC monetizing these Treasury bond purchases. Such a ‘helicopter money drop’ is fiscally, financially and macro-economically prudent in current circumstances, with inflation well below target and likely to fall further.

…click on the above link to read the rest of the article…

“We Are Heading Into Anarchy”: Official Says EU Will “Completely Break Down In 10 Days”

February 25, 2016

“We Are Heading Into Anarchy”: Official Says EU Will “Completely Break Down In 10 Days”

Norwegian PM Erna Solberg doesn’t want to have to skirt her country’s responsibilities under the Geneva Convention and she doesn’t want to trample over human rights either, but she will if she has to.

“It is a force majeure proposals which we will have in the event that it all breaks down,” Solberg said, in an interview with Berlingske, describing new measures she believes Norway may have to take if Sweden buckles under the weight of the refugee influx which saw some 163,000 asylum seekers inundate the country last year.

Solberg is effectively prepared to turn everyone away and go into lockdown mode should everything fall apart completely, causing Europe to descend into some kind of lawless, Hobbesian, free-for-all.

If that sounds far-fetched or hyperbolic consider that on Thursday, EU migration commissioner Dimitris Avramopoulos warned that the bloc has just 10 days to implement a plan that will bring about “tangible and clear results on the ground” or else “the whole system will completely break down.”

Avramopoulos also cautioned that a humanitarian crisis in Greece and in the Balkans is “very near.” Moves by countries to adopt ad hoc, state-specific measures to stem the flow are exacerbating the problem, the commissioner contends.

“We cannot continue to deal through unilateral, bilateral or trilateral actions; the first negative effects and impacts are already visible,” he said. “We have a shared responsibility –- all of us -– towards our neighbouring states, both EU and non-EU, but also towards those desperate people.”

By “the negative effects,” of unilateral actions, Avramopoulos is likely referring to the bottlenecks that are leaving thousands stranded in the Balkans. The chokepoints are being pressured by a series of border fences that have been erected over the past six months and the problem is exacerbated by stepped up border checks. In short: we’re witnessing the death of the bloc’s beloved Schengen.

…click on the above link to read the rest of the article…

Norway Warns Sweden Will Collapse, PM Will Defy Geneva Convention To Protect Border

February 24, 2016

Norway Warns Sweden Will Collapse, PM Will Defy Geneva Convention To Protect Border

As you might have heard, Sweden has a refugee problem.

We’ve spent quite a bit of time documenting the country’s trials and travails over the course of the last 12 months during which time Sweden has taken on more than 160,000 asylum seekers.

Last month, on the heels of reports from Germany that men of “Arab and North African” origin assaulted women in central Cologne during New Year’s Eve celebrations, Swedish media alleged that police orchestrated a massive coverup designed to keep a string of similar attacks that allegedly occurred at a youth festival in Stockholm’s Kungsträdgården last August from seeing the light of day.

Meanwhile, a 22-year-old refugee center worker was stabbed to death by a Somali migrant at a shelter for asylum seekers and at the Stockholm train station, “gangs” of Moroccan migrant children reportedly spend their days attacking security personnel and accosting women.

Sweden plans to deport some 80,000 of the refugees this year but according to Norwegian PM Erna Solberg, it may be too little too late to keep the country from collapsing. So concerned is Solberg that she’s now crafted an emergency law that will allow Norway to refuse asylum seekers at the border in the event “it all breaks down” in Sweden.

“It is a force majeure proposals which we will have in the event that it all breaks down, the power just comes, and all end in Norway because we are at the top and most of Europe. Norway is the end point, is not it,” Solberg said, in an interview with Berlingske whose Tinne Knudsen adds that “the legislation will soon be presented to the Parliament and is expected to meet broad support.”

…click on the above link to read the rest of the article…

‘Occupied’ Norway a window into our fossil fuel addiction

February 1, 2016

‘Occupied’ Norway a window into our fossil fuel addiction

Okay, I admit that the premise of Norwegian television’s new political thriller series “Occupied” is far-fetched. But that premise is a window on just how addicted to fossil fuels we are.

In “Occupied” Norway’s Green Party wins parliamentary elections and makes good on its (not-altogether-fictional) promise to shut down oil and natural gas production in the country as a way of addressing climate change. This fictional Green Party simultaneously builds a thorium-fueled reactor to provide electric power. The Greens promise many more reactors as they embrace the electrification of transportation to reduce Norway’s need for liquid fuels.

Norway’s oil and gas customers–the countries of the European Union and Sweden–object to the loss of critical fossil fuel supplies. They conspire with Russia to force Norway to restart oil and gas production. At first this involves a smallish invasion by Russian soldiers and a takeover of offshore oil and gas platforms which are restored to production by Russian work crews.

When the series was conceived, Norwegian television thought the idea was too implausible. But with the Russian annexation of Crimea and the war in Ukraine, “Occupied” has touched a nerve in a newly anxious Scandanavian population who now see Russia as more of threat. (And, of course, there is the memory of Germany’s occupation of Norway during World War II that still arouses fear and loathing in the hearts of many Norwegians.)

Coincidences aside, it does not seem surprising that the world would react strongly to a major oil and gas exporting nation deciding it will end all oil and gas production. If we were to substitute Saudi Arabia for Norway–where a partial shutdown is plausible if radical Saudi elements were to come to power in a messy coup–I can confidently predict that the United States and other Western powers would use whatever force is necessary to turn the oil spigots back on full blast.

…click on the above link to read the rest of the article…

So It Begins: Bloomberg Op-Ed Calls For An End Of Cash

February 1, 2016

So It Begins: Bloomberg Op-Ed Calls For An End Of Cash

In a moment of curious serendipity, a little over 90 minutes after we showed what a dystopian, centrally-planned, cashless society unleashed in a negative interest rate world would look like (“by forcing people and companies to convert their paper money into bank deposits, the hope is that they can be persuaded (coerced?) to spend that money rather than save it because those deposits will carry considerable costs”), and briefly after we laid out the countless recent warnings from “very serious people” that cash is evil and should be banned:

… while warning to await a full-on coopted media assault about the dangers of cash “which is an anacrhonysm from a bygone era, and that the world will be so much better if only everyone dutifully exchanges the physical currency in their pocket for digital, traceable, and deletable 1s and 0s”, none other than Bloomberg issued an editorial Op-Ed in which it had one simple message: “Bring On the Cashless Future.”

For those who were amused by our warning that a cashless world may be coming, here is precisely why the warning was issued, in Bloomberg’s digital ink:

Bring On the Cashless Future

Cash had a pretty good run for 4,000 years or so. These days, though, notes and coins increasingly seem declasse: They’re dirty and dangerous, unwieldy and expensive, antiquated and so very analog.

Sensing this dissatisfaction, entrepreneurs have introduced hundreds of digital currencies in the past few years, of which bitcoin is only the most famous.

…click on the above link to read the rest of the article…

Norway Pushes Panic Button: “We’re In A Crisis Now, We Can’t Deny That”

January 15, 2016

Norway Pushes Panic Button: “We’re In A Crisis Now, We Can’t Deny That”

We’ve spent quite a bit of time documenting Norway’s precarious balancing act in the face of slumping crude prices.

On the one hand, falling crude puts pressure on the krone which essentially allows the Norges Bank to compete in the regional currency wars without resorting to the same type of deeply negative rates as the ECB, the Riksbank, the Nationalbank, and the SNB. In short, a falling krone preserves export competitiveness in a world gone Keynesian crazy.

At the same time, falling crude puts enormous pressure on the country’s economy, which is heavily dependent on oil production

Additionally, collapsing crude revenue means the country will soon be forced to drawdown its $830 billion sovereign wealth fund (the largest in the world) to plug the various budget leaks caused by “lower for longer.”

Now, Norway has declared that its oil industry has entered a “crisis.”

“[The] industry is in a crisis now, we can’t deny that,” Bente Nyland, director general of the Norwegian Petroleum Directorate, told Bloomberg who reminds us that “Norway depends on oil and gas for about one-fifth of its economic output and nationwide, the petroleum industry has cut almost 30,000 jobs.”

The government last year announced plans to boost spending on the way to shoring up the flagging economy and officials says those measures – which are part of the reason why Norway will pull money from the SWF – should be sufficient to offset the pain from lower crude prices. “Finance Minister Siv Jensen says budget proposals put forward last year already contain ‘a lot of expansion’ and will help stem job losses,” Bloomberg continues, before noting that “the question is how quickly the economic adjustment brought on by a weaker krone will manifest itself.”

…click on the above link to read the rest of the article…

Contribution from Norway — War & Money

January 7, 2016

Contribution from Norway — War & Money

COMMENT:

Good morning, Martin.

Yesterday I bought an old booklet printed for 10 NoK at the Armed Forces Museum: “Laws, resolutions and prescripts due to circumstances of war”, by the Justice Department, printed in Kristiania (now Oslo) in 1917. I thought I there would find the outline of a recipe for what may come here this time around. Here are the highlights (in addition to an ever growing list of goods that are temporarily forbidden to export):

3. August 1914: Telegram from the Finance dept, ordering all major banks to execute the bank-plan restricting withdrawals from accounts, and immediately order all banks to stop any withdrawal not in accordance with the plan.

4. August 1914: Maximum prices to be imposed on certain goods

4. August 1914: Payment of expireing government paper will be postponed one month, ordinary interest rate applies. For paper without interest rates, 5% p.a. will be paid during the posponment period.

5. August 1914: Bank of Norway is temporarily not obliged to exchange its notes with gold.

15. August 1914: Since there was no bank run, the bank-plan is relaxed, but banks shall only allow withdrawals to companies to pay salaries etc. Private persons are allowed to withdraw what the bank think they will need for one week at the time. Under no circumstances must the banking restrictions come in the way of companies/private persons paying taxes to state/munis.

18. August 1914: Gold and silver in any form is for the time being prohibited to export from Norway.

18. September 1914: International private telegrams are to be in Norwegian, Swedish, Danish, German, English, French or Russian, and be written in a clear way that gives meaning to the operators. If not, the telegrams will not be forwarded and no notification given. International phonecalls are to be in Norwegian, Swedish or Danish. Non- compliance leads to termination of the conversation.

…click on the above link to read the rest of the article…

Sweden Warns Of Dire “Consequences” From Massive Housing Bubble, Heavily Indebted Households

November 25, 2015

Sweden Warns Of Dire “Consequences” From Massive Housing Bubble, Heavily Indebted Households

Late last month, Sweden tripled down on QE, as the Riksbank announced it would expand its asset purchases by SEK65 billion. Or, visually:

The recent history of Swedish monetary policy is viewed by some as a cautionary tale about what can happen when a central bank attempts to normalize policy too “early.” As a reminder, the Riskbank began raising rates in 2010. Reminiscing about the bank’s decision four years later, Paul Krugman blew a gasket on the way to accusing Sweden of being a nefarious lot of job hating heretics hell bent on perpetuating global inequality by enriching creditors at the expense of impoverished debtors.

Of course Krugman needn’t have been so hard on the Riksbank. After all, they reversed course a little over a year later and since then, it’s been nothing but easing as the repo rate fell 35 bps into negative territory.

The problem, as we’ve documented quite extensively, is that Sweden’s adventures in NIRP-dom have done little to boost inflation (to be fair, unemployment has fallen).

For the Paul Krugmans of the world, that’s evidence of a hangover from the series of hikes the Riksbank embarked on beginning in 2010. For anyone who is sane, it’s evidence that, i) unconventional monetary policy is bumping up against the law of diminishing returns , and ii) when everyone is easing, no one gets the benefits.

But while NIRP may not be doing much for inflation, it sure has been effective at creating a rather scary looking housing bubble. Have a look:

We discussed this at length in “Sweden Goes Full Krugman, Gets Massive Housing Bubble.” Here’s what the Riskbank had to say about this after its September meeting:

“Low interest rates contribute to the trends of rising house prices and increasing indebtedness in the Swedish household sector continuing.

…click on the above link to read the rest of the article…

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