Oil projects freeze to cool economy

NORWAY's centrist government has devised an unprecedented scheme to dampen booming economic growth. It announced yesterday it was postponing all oil and gas projects by a year.

"There are big dangers that the economy will overheat," Marit Arnstad, the Oil and Energy Minister, told parliament. She said the delays, designed to cut 5.2bn crowns (pounds 4.2bn) from 1998 investments of 66.9bn crowns, would cool the economy.

The reductions affect 12 oil and gas projects including British Petroleum's Ula Trias. "The government has decided to delay investments in all fields under consideration by one year to 1999 from 1998," Ms Arnstad said. The central bank has forecast gross domestic product growth of 5 per cent in 1998.

Norway is the second largest oil exporter in the world after Saudi Arabia, pumping 3.3 million barrels per day. The delays would have a long-term impact on the development of Norway's reserves and are unrelated to efforts by OPEC to prop up sagging oil prices.

Ms Arnstad said that, without any curbs, projected 1998 investments in oil and gas sector would surge to 66.9bn crowns, 13.7bn crowns above the forecast in the 1998 budget.

She said postponements would benefit oil companies, which she said were having to pay record rig rates and high salaries due to shortages of specialised labour.

The delay would also cut 1999 investments by 11.5bn crowns, Ms Arnstad said, adding that investments in projects tended to be higher in the second year after they start.

Arnstad said four of the projects - Norsk Hydro's Fram and Grane, state oil firm Statoil's Gullfaks satellites and Saga's Snorre 2 - were so big that they would require parliamentary approval.

But the government has just 42 seats of 165 in parliament and could face problems over Saga's Snorre 2, which has come furthest. The main opposition Labour Party, with 65 seats in parliament, said that parliament should give a green light to Snorre by the summer, and that it would decide only then whether it favoured a delay in investments.

Opposition right-wing parties want Snorre to go ahead unhindered, saying companies should be allowed to decide for themselves without government interference.