Norway's oil firms lobby for Arctic area and tax repeal

OSLO, Sept 16 Mon Sep 16, 2013 6:33am EDT

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OSLO, Sept 16 (Reuters) - Oil firms in Norway, western Europe's biggest oil and gas producer, asked the incoming ruling parties on Monday to repeal a recent tax hike and open the sensitive Arctic Lofoten archipelago to exploration.

Drilling around the Lofoten islands is becoming one of the top issues in coalition talks among the four election-winning parties and a new government is expected to uphold a drilling ban, forcing oil companies into more remote and difficult waters.

Although the top two parties which will make up the government favour opening the area, which could hold around 1.27 billion barrels of oil equivalents, the smaller parties fiercely oppose such a move, fearing the oil industry would endanger its pristine environment, tourism and the world's largest cod stocks.

Needing the votes of the small parties for a majority, some analysts expect the Conservatives and the Progress Party to yield on Lofoten and sources close to two parties recently told daily newspaper Aftenposten that the two are ready to give in.

But energy firms argue it takes 15 years to start production from the time an area is opened to energy firms, so a delay now would impact production beyond 2025, when output in the region is already seen falling.

"To curb the production decline on the Norwegian continental shelf beyond 2025, new areas need to be opened up urgently," the Norwegian Oil and Gas Association, which represents dozens of producers including majors such as Statoil, BP, Chevron, ConocoPhillips, Royal Dutch Shell and Total, said in letter to the four parties.

"Keeping the northeastern Norwegian Sea closed for another four years prevents a comprehensive and cost-effective development of the shelf," it said.

It also argued that a new oil tax, the first in decades, will reduce the profitability of marginal projects and will likely lead to the cancellation of new developments, further reducing production.

The Conservatives, Progress, the Liberals and the Christian Democrats begun closed-door coalition talks on Monday and a final deal is not expected for several weeks.

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