Norway’s Energy Champion Comes to Regret Foray Into Shale Oil

(Bloomberg) -- Norwegian oil and gas giant Equinor ASA said it never should have made the investments into U.S. shale fields that resulted in billions of dollars in losses and a brewing political controversy at home.

After the company announced the sale of assets in North Dakota’s Bakken shale formation for $900 million -- just a fraction of the price it originally paid almost a decade ago -- Equinor Chief Executive Officer Anders Opedal said things would have been done very differently in hindsight.

“We should not have made these investments,” Opedal said in a phone interview on Wednesday after Equinor reported a surprise fourth-quarter loss. When the company did these deals “higher oil prices were expected in the future, a high consumption of oil was expected,” but that’s not how it turned out, he said.

Since Equinor’s entry, U.S. shale has undergone two big cycles of boom and bust driven by big swings in crude prices. The industry has barely begun to recover from the slump triggered last year by the coronavirus pandemic, which saw prices fall briefly below zero.

U.S. benchmark West Texas Intermediate crude has recovered to above $58 a barrel since then, but Equinor still decided it was better to sell its North Dakota assets.

“The Bakken does not compete,” Opedal said. “We have chosen to sell the Bakken to reinvest that money into other parts of our portfolio, where we get a higher return.”

Political Scrutiny

In total, Equinor has written down a total of $11.5 billion on its U.S. shale assets, with $8 billion in the Bakken and the remainder in the Eagle Ford formation in Texas, Opedal said.

Equinor’s international misadventures, which largely occurred when Helge Lund was CEO, haven’t only caused concern for investors, who drove the company’s share price down by 2.2% on Wednesday. They are the subject of increasing scrutiny by Norway’s parliament.

Lawmakers have accused the government, which owns 67% of Equinor, of not properly supervising management. Espen Barth Eide, a member of parliament for the opposition Labor Party, said the shale losses show the state should be more active on “accountability, sound financial management and explicit ESG demands.”

In a report published in December, Norway’s General Auditor concluded that the government hasn’t acted as a professional and informed owner for several years. Parliament’s control committee will arrange a hearing about the report later this year.

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