May 8, 2020 / 12:41 PM / a month ago

Norway's Aker braces for sustained low oil prices

OSLO (Reuters) - Aker ASA, a major investor across Norway’s oil industries, is preparing for an extended period of low crude prices, its chief executive said on Friday.

FILE PHOTO: Aker Solutions and Kvaerner flags flutter next to their headquarters in Fornebu, Norway, June 1, 2017. REUTERS/Ints Kalnins

The net asset value (NAV) of Aker’s holdings tumbled 52% to 24.1 billion Norwegian crowns ($2.36 billion) in the first quarter as the shares of its listed businesses tumbled as the coronavirus pandemic spread and oil demand plunged, though their value has since rebounded to about 30 billion crowns, it said on Friday.

“I don’t expect the oil market to come into balance during the next couple of years ... due to the underlying supply and demand mechanics being impacted by storage (overhang),” Chief Executive Oeyvind Eriksen told Reuters.

“A number of producers will be wiped out, a number of suppliers will go bankrupt, and those who survive will explore opportunities to consolidate.”

Aker, which is the largest shareholder of oil and gas producer Aker BP, Aker Solutions and Kvaerner, is considering investing more in renewable energy but has yet to make a final decision, Eriksen added.

Still, Eriksen has joined industry executives in calling on Norway’s parliament to boost planned tax relief for oil investments, arguing that 50,000 jobs are at stake in the country of 5.4 million people.

If the proposal is not amended, platform builder Kvaerner could be out of business by mid-2022, while engineering company Aker Solutions would have to lay off most of its highly skilled workers, Aker’s order book forecasts show.

Aker BP’s plans to develop a series of discoveries in the so-called NOAKA area in the North Sea, potentially the largest new oilfield project off Norway, in partnership with Equinor would have to be scrapped, Eriksen said.

Aker Solutions has taken a minority stake in a U.S.-based developer of floating offshore wind technology, Principle Power, while Kvaerner was awarded a 1.5 billion Norwegian crown ($146.6 million) contract to deliver floating concrete hulls for offshore wind turbines.

The traditional petroleum business, however, still provides the bulk of revenue for those companies, making for a challenging outlook as oil companies cut spending on new projects to preserve cash.

Editing by David Goodman

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