– This is significant and not just a “paper cut” – E24

– I have to honestly say that I did not expect to decide something like this in this work, but it also says something about how extraordinary this situation is, says the Minister of Oil and Energy, Tina Bru (H), to E24.

Late Wednesday night, the Ministry of Oil and Energy announced that it had decided to cut Norwegian oil production as a countermeasure to the huge drop in oil prices during the crown crisis.

Bru says he believes the Norwegian cut with the others announced will help restore the balance of the oil market faster than the market mechanisms alone will.

This is the first time since 2002 that Norway has made such a decision.

The cuts begin in June, when it will cut 250,000 barrels per day from the benchmark production of 1.86 million barrels per day. In the second half of the year, 134,000 barrels per day will be cut. In total, Norwegian oil production in December 2020 will be 300,000 barrels less than before. Gas and condensate production is exempt.

The decision came after OPEC countries, with Saudi Arabia at the forefront, agreed with Russia to cut almost 10 million barrels of production from May 1.

When asked if the government will also introduce more measures or tax changes, like the oil industry, LO, NHO and KonKraft have requested, the Oil Minister will not comment.

– What if some oil companies don’t want or think they can’t cut?

– We have an opportunity to do this and we will. No country wants to cut, but everyone wants to comply with the cuts of other countries. Then it will be here. I think most companies see the value of having a more stable oil market, says Bru.

She notes that the law stipulates that a court must “seek a fair distribution.” The cut itself will be introduced through the regulation of production in each field. Therefore, companies will be affected depending on their participation in the different fields.

– There are some minor exceptions, but generally this applies to all fields. The existing production license will be based and the various oil companies will be consulted, says Bru.

– Not just a “paper cut”

On Wednesday night, oil analyst Helge Martinsen of DNB Markets said he estimates that the effective cuts will be much lower than it appears. He described the Norwegian cuts as “headline cuts.”

It has calculated that the effective cuts are 30,000 barrels per day in June and 50,000 barrels per day in the second half of the year.

– The conclusion is simple, it does not mean anything to the oil market. But it is a good thing and it is important to contribute, Martinsen said.

The Ministry’s report indicates that from the cut of 300,000 barrels per day to December 2020, 134,000 barrels will come from fields currently in production.

The rest of the 166,000 barrels per day cut comes from the Yme, Martin Linge, Njord, Hyme, Bauge and Tor fields that will not go into production this year as planned, but next.

The Oil Minister rejects the claims that Norway’s cuts are really small and more symbolic:

– I would say this is significant and not just a “paper cut,” says Bru, and continues:

– Of course, delayed start of production in some fields will be something, but we were also able to produce more than expected this year, thanks in part to Johan Sverdrup. A reduction of 300,000 barrels per day in December is significant, says Bru.

He also adds that in the global context, Norway accounts for around two percent of oil production and is therefore a relatively small player.

– Did you consider cutting more than you decided?

– This is based on comprehensive balances that we have performed based on what is best for the Norwegian economy and resource management. We believe this is the right thing to do, says Bru.

I think the market is stabilizing this year.

– What compensations have you done before reaching the conclusion of the cut?

– Cutting production is not something you think you should do. All countries want to produce as much as they can for the economy and resource management, but we are now in a situation where oil prices are very low and the market is unbalanced, Bru says.

It again emphasizes the Norwegian line that this is a decision that Norway has made on its own and not as part of an agreement with OPEC or other oil countries.

– An important prerequisite has been that other major oil producers have announced cuts, Bru says, noting the OPEC deal, among other things.

– The cut is currently valid for 2020. Is it appropriate to extend it in 2021 if necessary?

– We may have to go back to that. Now we have analyzed the year we are in and we will closely follow the market, says Bru.

She believes and hopes that times will change:

“We expect a market stabilization this year thanks to the production agreement that was signed (between OPEC and Russia, magazine note) and because we expect the global economy to stabilize as contagion measures are reduced,” says Bru .