Norway Reinforces Role As Stable, Long-Term Supplier

Norway expects to maintain a high level of exports to gas-hungry Europe through 2030. But questions still remain over Norwegian longer-term supply even after it takes Russia's spot as Europe's main piped gas supplier. In the immediate future, Oslo is discussing potential solutions with European partners to try to stem the current energy crisis. Norway’s Prime Minister Jonas Gahr Store has emphasized that any market rewiring must not jeopardize future energy supplies.

Norway expects to deliver 122 billion cubic meters (12 billion cubic feet per day) of gas to Europe from its offshore fields this year, around 8% more than in 2021. That includes 117 Bcm of piped gas deliveries, up from 113.2 Bcm last year, and around 5 Bcm attributable to Equinor’s Hammerfest LNG plant. State-run pipeline operator Gassco tells Energy Intelligence that a new exit point in its vast transport system through the 10 Bcm per year Baltic Pipe linking Norway to Poland could potentially lift the network’s capacity. That will partly depend on the impact of a “looping effect” once the pipeline starts up in October, but potentially it could see piped exports increase by a further 2 Bcm next year.

The value of Norway’s natural gas exports so far this year to the end of July has more than quadrupled year-on-year to a record 599 billion kroner ($60 billion) as prices — and demand — have soared, according to Statistics Norway. The country has stepped up gas production by 10% overall this year to keep supplies flowing to Europe and help offset the drop in gas flows from Russia. As a result, non-EU member Norway is now the largest supplier of energy to Europe, accounting for roughly one-quarter of the region’s consumption and reinforcing its stated role as a “stable and reliable” long-term supplier.

Long-Term Predictability  

The Norwegian government made clear last week that it does not believe emergency market proposals being explored by Brussels to cap the price of gas imports will help the current crisis. "This will not solve the fundamental problem, namely that there is a shortage of gas in Europe," Prime Minister Store said in a statement. Store said previously that Oslo recognized the need “to discuss different solutions” with Europe, “our most important market and close ally.” He also hinted that Norwegian gas producers might be open to negotiate more favorable long-term contracts with European customers. “It is the gas producers that can enter into agreements with customers in Europe. Predictability and the long term will be an advantage both for gas producers and customers in Europe. It will make it easier for Europe to get enough energy in the future as well,” Store said.

Typically, long-term bilateral supply contracts offer producers more predictable revenues than more volatile spot prices and thus should also make it easier to plan investments. Norway’s state-controlled Equinor sells gas both on the spot market at trading hubs and via bilateral long-term contracts. “We are still open to enter into bilateral, long-term contracts,” a spokesman tells Energy Intelligence when asked if Equinor is discussing with European customers the possibility of selling natural gas, or LNG, at a fixed price lower than it is now. “LNG from Snohvit is sold on long-term bilateral contracts,” he notes.

Post-2030 Demand Doubts

Oslo is also mindful of the threat of intolerably high prices to European economies, and accordingly future gas demand. Norway will cooperate closely with its European neighbors for the next leg of its low-carbon growth, focused on offshore wind, blue hydrogen and carbon capture and storage. “A crisis in isolation is never a good thing because it creates an extremely difficult situation for European households. We now see the huge debate with extremely high electricity prices in Norway. It's probably going to create types of demand destruction that will be difficult to tackle in the next phase going forward,” Deputy Energy Minister Andreas Bjelland Eriksen tells Energy Intelligence.

In the medium term, Eriksen believes the EU’s RePowerEU initiative, which aims to transition away from Russian gas by 2027, will underpin demand for Norwegian gas. Moreover, he says the agreement made earlier this year between European Commission Executive Vice President Frans Timmermans and Norway’s Petroleum and Energy Minister Terje Aasland “states very clearly that Norwegian gas also has a role to play in the medium-term picture. So very clearly we do see more interest in investments in new gas production in Norway.”

The post-2030 outlook for indigenous gas production is less clear, with quite a number of fields coming to the end of life, Eriksen says. More exploration will be needed in order to maintain production. “Naturally with the current gas prices, with the current investments in LNG globally, the possibility for the Barents [Sea] region to play a bigger role going forward is also significant,” Eriksen says. And he says the electrification of offshore production facilities for new fields to be “sustainable” going forward will be crucial to Norway achieving its goal to slash emissions from oil and gas by 50% by 2030. “It's very important to the role Norwegian gas can play in the future energy system in Europe.”

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