Oil Production in a Changing  : Climate An Investigation of Optimal Oil Extraction on the Norwegian Continental Shelf under Current and Potential Climate Policies

2021

This thesis addresses the challenges of being an oil nation in a time where the world needs

to combat climate changes. Emissions from fossil fuels are the dominant cause of global

warming, and the need for actions to reduce the global combustion is obvious. Despite

decades of international climate negotiations, the flow of emissions to the atmosphere

continues to grow, and the heat continues towards new heights. Leading environmental

economists now suggest restraining the supply of petroleum resources to reach targets

related to climate change.

We aim to study the effect today’s and potential climate policies have on oil production

on the Norwegian continental shelf the next decade. Our results show that the currently

announced climate policy does affect the extraction path of oil, given an expected oil price

of 552.5 NOK. This is in line with similar research. We also look at the implementation

of a production fee on oil. We find that the production fee will reduce resource wealth,

and might change the extraction path on existing fields. The latter depends on the size of

the fee. The higher estimate of 452.55 NOK per barrel causes 10 out of 11 fields in our

sample to stop production. The lower estimatec fee of 25.86 NOK per barrel implies no

changes to the extraction paths.