Norway Steps Up as EU Supplier

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Norway’s role as a critical supplier of hydrocarbons to Europe came into sharp focus during 2022 after Russia’s war in Ukraine left the continent short of oil and gas. Oslo’s relatively stable fiscal terms have enabled companies to position themselves for the future and maintain high production levels offshore Norway to 2030. But non-EU member Norway is seeking greater clarity and commitment from the bloc around its future appetite for gas. Norwegian operators have stepped up to relieve Europe’s energy supply security concerns, with a record 24 upstream projects approved last year alone. That’s out of a total 35 projects sanctioned since 2020 under Oslo’s temporary tax regime, amounting to almost $43 billion of greenfield investment, according to consultancy Rystad Energy. Aker BP operates 17 of the 35 projects on the list, including the Yggdrasil hub (start-up 2027), currently Norway's biggest future oil and gas scheme. Equinor operates 11 projects, with Breidablikk (start up 2025) seen as a key contributor to oil output while Irpa (start-up 2026) and Shell’s Ormen Lange phase 3 (start-up 2025) will help maintain a high flow of gas to Europe.

Norway’s fiscal terms have been an important factor in bolstering supplies to Europe at a critical time. The 35 projects sanctioned under the temporary tax regime will tap almost 2.5 billion barrels of oil equivalent of recoverable resources, keeping investment steady until the late 2020s and tax revenues flowing to government coffers. Rystad forecasts a steep production ramp-up from 2025, peaking at almost 4.49 million barrels of oil equivalent per day in 2027-28, with liquids output reaching 2.49 million boe/d. However, spending is projected to fall sharply to around 170 billion kroner ($16.8 billion) in 2027 by when most projects will be online. It reckons Norway will supply close to 30% of all European gas by 2028, up from around 24% now. The Norwegian Petroleum Directorate’s (NPD) more modest forecast sees output peaking earlier, reaching 4.3 million boe/d in 2025, up from 4.12 million boe/d in 2022. Norway exported 122 billion cubic meters of pipeline gas to Europe last year, up 8% from 2021 and the highest level recorded by the NPD. The upstream regulator sees gas exports peaking at 122.46 Bcm in 2025. Liquids production in 2022 was almost 7% lower than the previous year at 1.89 million barrels per day.

Across the North Sea, the UK government’s extension of a national levy on companies’ windfall profits has had some unintended consequences. Operators there have been assessing what the latest fiscal intervention means for their investments and strategic goals. Harbour Energy — the UK’s biggest oil and gas producer — will continue to invest in existing opportunities in its portfolio. But it will scale back investment in other areas like exploration, cut jobs, and diversify away from the UK. TotalEnergies is cutting investment in the UK by 25% this year due to the levy, and other companies have warned that it could affect their investment decisions. North Sea drillers from the International Association of Drilling Contractors this week flagged the ongoing “migration” of rigs and equipment from the UK offshore due to the lack of opportunities and better prospects overseas.

At the same time, Norway is seeking greater clarity and commitment from Brussels over its future gas needs and net-zero policy objectives to justify longer-term investment in projects and export infrastructure. The European Commission’s climate-related policy goal to ban Arctic hydrocarbon development and stop importing such hydrocarbons have added to the uncertainty. Indeed, wrangling over the EU's Arctic oil and gas policy has led to an impasse in negotiations with Norway over a “green industrial alliance.” According to Norwegian non-governmental organization Bellona, Oslo wants the draft agreement text to support activity in the Arctic region after 2030, which the EU rejects. Norway sees the Arctic Barents Sea as a significant source of untapped gas resources. And Bellona founder Frederic Hauge tells Energy Intelligence that gas lobbyists are pushing the EU hard for support for continued exploration to justify further investment, continuation and even potentially expansion of fossil activities. Still, he says, failure to forge closer ties on industrialized clean technologies with the EU, its most important trading partner, would be to the detriment of future-oriented industries in Norway and the development of markets for batteries, carbon capture and storage technology, and hydrogen.

For more coverage of the Ukraine crisis, visit Ukraine Crisis: Energy Impact >

Upstream Projects, Offshore Oil and Gas, Fiscal Terms, Gas Supply, Gas Demand, Ukraine Crisis
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