The PROSPECTS project analyses the medium and long-run prospects of the Norwegian petroleum sector and its role for the economy as a whole. For this purpose, Stage I of the project identifies important factors that affect the extraction on the Norwegian continental shelf and their impacts. Three analyses of factors behind petroleum prices and rig rates are previously reported. Two of these are now published, while the third is invited to resubmit, in journals. We have also continued the work on the role of the labour markets. One Working Paper is being submitted to a journal these days. Another Working Paper is now under submission, where we have extended the register data set of employees with two years. As previously reported, this has enabled us to study the recent oil price fall and its consequences for employment of domestic and foreign labour and the wage premia.
The development of the petroleum activity on the Norwegian Continental Shelf and in the Arctic region Norway is in focus in two finalised, and one almost ready, studies. One is published, which discusses the impacts in the Barents region of projected international markets, geopolitics and technological progress, as well as climate change. In particular, we have studied the oil price sensitivity by means of a detailed oil market model (Frisbee). We find that expectations of relatively low oil prices will reduce the activity in the Russian Barents region considerably, while the impact in the Norwegian parts is primarily to cause an activity delay. A second paper on the Arctic production has been accepted for publication in journal. It investigates the effects of a downscaling of global coal-based electricity generation in line with the 2C target. Compared to a business-as-usual scenario, the Arctic gas production is found to drop. The third paper studies effects of changes in the Norwegian petroleum taxation for petroleum companies and public revenue. It will be ready for submission within January 2018.
Stage II of PROSPECTS is in its concluding phase. Focus is on the role of the Norwegian petroleum sector for the Norwegian economy as a whole and the macroeconomic consequences of a declining industry. This phase makes extensive use of macroeconomic models. The first analysis is finalised and under second submission. It looks at the macroeconomic effects of labour migration driven by the petroleum activity. This is related to the 'resource curse' issue, as migration has been suggested to potentially modify the challenges that arise from directing a large share of the labour to the petroleum sector. In this new article we describe a counterfactual analysis of how the oil boom from 2004 and the decline from 2014 would have influenced the Norwegian economy under alternative migration assumptions. Second, a finalised study on reallocating human capital resources from the petroleum sector shows that the released human capital stimulates productivity and export production in the mainland economy both through increased R&D and absorbed knowledge from abroad. The paper will be submitted before Christmas. A third paper investigates the `directed technological change´-hypothesis. A result from this strand of literature is that for the globe as a whole, R&D resources must be transferred extensively to clean innovation in order to curb climate change. The study asks what the implications of such mechanisms will be for a single, open and petroleum extracting economy like the Norwegian. The theoretical and numerical results indicate that massive public action to redirect R&D is needed to avoid a resource curse. The paper is ready for WP submission in 2017 and will be submitted for a journal when accepted.
The project held a seminar and a workshop in spring 2017 and the finalizing seminar will take place in spring 2018. For more activities and information please confer http://www.ssb.no/en/forskning/energi-og-miljookonomi/energi-og-miljopolitikk/prospects-for-norwegian-petroleum-extraction-and-for-the-norwegian-economy-as-a-Whole.
The project will analyse the medium and long-run prospects of the Norwegian petroleum sector and its role for the economy as a whole. For this purpose, the first stage of the project will identify the up and downstream factors that affect the extraction o n the Norwegian continental shelf and their quantitative and qualitative impacts. This involves looking at petroleum prices, rig rates and wage formation in the petroleum sector. We will also analyse current and alternative Norwegian policy regimes toward s the petroleum industry and their possible impacts on the future size and profitability of the petroleum sector. This first stage will combine ex post econometric analyses and model projections by means of global numerical energy models. The numerical mo dels we use facilitate a particular focus on the Arctic sector, and the Norwegian and Russian Arctic will be given special attention to increase our understanding on main factors determining the development of the Arctic as an oil and gas arena.
In the n ext stage we will look at the role of the Norwegian petroleum extraction sector for the Norwegian economy as a whole. Among other questions, we will be able to say more about the risks of developing Dutch disease in Norway. Based on econometric analysis o f worker flows (foreign and domestic) into and out of the petroleum sector and macroeconomic models, we will examine the extent to which the sector functions as an entry-port for high-skilled migrants, and the extent to which the sector provides workers with valuable knowledge and skills that spills over to the mainland economy as the workers leave the sector. We will also study spillovers between R&D areas and knowledge spillovers through international trading and networking, with a focus on how these a ffect Norwegian economic development in the future as the petroleum extraction era is coming closer to an end.