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

By Balazs Koranyi

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

Drilling around the Lofoten islands is becoming one of thetop issues in coalition talks among the four election-winningparties and a new government is expected to uphold a drillingban, forcing oil companies into more remote and difficultwaters.

Although the top two parties which will make up thegovernment favour opening the area, which could hold around 1.27billion barrels of oil equivalents, the smaller parties fiercelyoppose such a move, fearing the oil industry would endanger itspristine environment, tourism and the world's largest codstocks.

Needing the votes of the small parties for a majority, someanalysts expect the Conservatives and the Progress Party toyield on Lofoten and sources close to two parties recently tolddaily newspaper Aftenposten that the two are ready to give in.

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

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

"Keeping the northeastern Norwegian Sea closed for anotherfour years prevents a comprehensive and cost-effectivedevelopment 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 willlikely lead to the cancellation of new developments, furtherreducing production.

The Conservatives, Progress, the Liberals and the ChristianDemocrats begun closed-door coalition talks on Monday and afinal deal is not expected for several weeks.