The country's energy revenues last year jumped by $100 billion.
Stavanger, Norway's energy centre. Thomas Ekstrom, The New York Times
This article is for you
By Stanley Reed
Stanley Reed, a London-based energy writer, travelled to Oslo and Stavanger, Norway, to write this article.
April 6, 2023
A modest office building in Stavanger overlooking a Norwegian fjord is the new frontline for Europe's security of energy. Petoro, an oil and gas company, oversees the biggest natural gas and oil fields in Europe on Norway's rich continental shelf.
Since the beginning of the Russian war in Ukraine, these operations in Norwegian waters -- marked by massive offshore platform and wells that snake thousands of feet beneath the surface -- are instrumental in helping Europe to heat its homes and produce electricity.
Norway has become Europe's largest supplier of fuel after increasing its natural gas exports in response to Russia's reduction. Norway also supplies more oil to its neighboring countries, replacing Russian oil that is embargoed.
Kristin Fjerskov-Kragseth is the CEO of Petoro - a state owned company that manages Norway’s petroleum assets. She added that 'we were always important', but perhaps we didn't know it.
Norway is well aware of the significance of its elevated position. The nation has a population of about 5.5 million, and energy accounts for a third or more of the country's economic output. Like Saudi Arabia, Norway also owns large stakes in the companies that extract oil and gas. The war in Ukraine increased demand for energy and has added about $100 billion to Norway’s oil-and-gas earnings.
The last Norwegian national election in 2021 was dominated by tensions about climate change and the exploration of petroleum. The sudden importance of energy supply appears to have led to a consensus in Norway that it should continue to produce large amounts of oil, at least for the next few years.
Ulf Sverdrup is the director of Norwegian Institute of International Affairs. He said that the war has changed the political mood. "Europe basically said: Hey! We need your energy.''
Norway, a small country bordering Russia, is not part of the European Union but pays close attention to its neighbors. Oslo was a source of help for Brussels, European nations and Germany after the war began. Germany had heavily relied on Russian gas.
In an interview, Norway's Prime Minister, Jonas Gahr Store said that Norway's contribution to Europe was to maintain and increase gas exports.
The State of the War
Counteroffensive challenges: With new assault units and powerful Western weapons, Ukraine is ready for a crucial spring campaign. It will be a challenge to overcome casualties and keep troops motivated.
Norway already produced a large volume of natural gas and shipped it via undersea pipes to northern Europe. However, the government approved an increase in output. The energy companies adjusted their production to increase gas at the expense oil. Last year, the increase in production of gas was 8 percent. This made Norway the main source of gas in Europe.
Anders Opedal is the CEO of Equinor, Norway’s state-controlled energy company.
Norway's financial reward for helping Europe is substantial. Petoro, which made almost three times as much in 2021 as it did in 2022, reported record earnings of $75 billion. According to estimates by the Norwegian government, oil and gas revenues contributed $125 billion in 2022 to the Norwegian State -- approximately $100 billion more than they did in 2021.
This money is deposited in a sovereign wealth fund worth $1.3 trillion, officially called the Government Pension Fund Global. However, it is also known as the Oil Fund by many. The fund holds an average of 1.5 percent of the 9,000 companies listed worldwide. Its expected annual earnings can be used to finance nearly 20 percent of state budget. This arrangement protects the Norwegian economy from oil and gas price fluctuations. The Norwegian economy grew by 3.3 percent between 2022 and 2022.
The question is whether or not the Norwegian industry will be able to continue making such profits. Gas prices in Europe have fallen for several months and are now about one-eighth the price they reached last summer. The war could accelerate the shift to renewable energy on the continent that had already begun before the invasion.
Some Norwegians are angry about the wealth that has been earned since the war began. Rasmus Hansson of the Green Party, a Green Party member of parliament, said, "We consider this profit as war profit." He suggested the money be invested into a fund that would aid Ukraine and other war-affected countries.
The fact that Norway produces a lot of oil and gas as well as a large amount of hydropower did not shield it from the high electric prices that most Europeans experienced last year. This is because its markets were closely tied to those of its neighbors.
Svein T. Kristiansen is the owner of Smed T. Kristiansen in Stavanger, which makes parts for offshore wind farms and oil installations.
Norway will be able maintain high gas exports to Europe over the next few years. The government implemented temporary tax changes in 2020 to prevent the pandemic from halting investment. These incentives have resulted in a surge of new drilling, development and investment worth $43 billion.
Aker BP is an oil and gas company located outside Oslo that plans to invest 19 billion dollars to increase production by a third before 2028. Karl Johnny Hersvik is the CEO of Aker BP.
Mathias Schioldborg is an analyst with Rystad Energy in Norway. He says that the output of these new fields will be sufficient to compensate for the declines of older ones over the next few decades. The government has modeled scenarios that show the oil and gas production in Norway will peak at the end of the decade.
Norway is unlikely to be able to supply more gas than it currently does. The pipeline network that carries Norwegian gas from Norway to Europe has limited capacity.
Hersvik stated that he was running as hard and as fast as he could. He said that the case for adding more pipelines into Europe was weak because it would take around 20 years to recover the cost of investment. He said: 'I hope that we will have resolved this problem by then,' in reference to the conflict in Ukraine.
The pressure on Norway to reduce greenhouse gas emissions and curtail the oil and natural gas industry is unlikely to disappear. Hansson, a Green Party legislator from Norway, stated that he believed Norway should phase out all fossil fuels around 2035 in order to protect the climate.
Environmental groups acknowledge that the war requires natural gas production, but say that the government shouldn't use this energy crunch to force the development of new oil and gas reserves that will produce fossil fuels over many years.
Frode Pliam, Greenpeace's Norway director, said that Norway is enslaving Europe to a climate problem.
Norway, like most European countries has started a transition towards cleaner energy. Oil and gas companies are investing in offshore wind farms to reduce emissions. They also power pumps and other equipment with electricity rather than gas or diesel.
Some people in the oil and gas industry are concerned that the transition to renewable technologies will not create enough jobs well-paid to sustain the approximately 6 percent of workers currently employed in oil and natural gas.
Hilde-Maritrysst is the leader of SAFE a union representing 12,000 energy workers. She said that working on oil platforms was more stimulating than work in the renewable energy sector.
She said, "You use your mind, your education, and your experience." It doesn't seem like wind turbines will provide you with that.
Stavanger is Norway's oil-and-gas hub. It has been around for 50 years. The city has suffered job losses over the last decade, first due to the fall in oil prices in 2014, and then because of the pandemic. However, new investments have re-energized the city.
Kari Nessa Nortun, its mayor, appears to be open-minded and ready to accept whatever is offered. Ms. Nordtun stated that she was a proud oil child, but also praised companies who had previously focused on the oil industry for investing money and staff into renewables.
There are still 50,000 oil and gas jobs in Stavanger, compared to just 1,000 green energy jobs.
Analysts believe that the Norwegian government will be pragmatic in its approach to shaping the country's energy sector so as to align it with the policies and demands of European countries like Germany and the European Union.
"For Norway to have an future," said Mr. Sverdrup of the Norwegian Institute for International Affairs. "We must be aligned with the future energy system in Europe."
Henrik Pryser Libell reported from Oslo and Erika Solomon contributed from Berlin.