Energy transition

Norway Will Boost Green Energy But Won’t Stop Oil and Gas Development

Norway appears to be taking a dual approach to energy transition. In its just-released energy white paper, the Norwegian government says it is committed to producing renewable energy and bolstering its power grid but isn’t willing to halt development of its oil and gas resources.

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Reporting on the announcement of Norway’s first offshore wind tender the week of 7 June, Reuters said, “Oslo will present details of the tender as part of a whitepaper on the energy sector.” But the release of the whitepaper on 11 June put to rest any hope or concern that the Norwegian government was about to put all—or even most—of its “energy eggs” in the renewables “basket.”

“The government wants Norwegian energy resources to form the basis for more jobs and prosperity in society. Thus, the white paper has been titled Putting Energy to Work,” said a press release.

According to the government statement, Norway’s position as an energy nation will be developed further through new initiatives encompassing hydrogen, offshore wind, strengthening the power grid, and a low-emissions oil and gas sector. “The white paper,” it said, “further expands on the government’s comprehensive climate action plan and demonstrates how renewable energy and the power grid are laying the foundations for electrification and the phasing out of fossil-fuel-based energy.”

However, that “phasing out” will not happen any time soon. “Norway is betting on hydrogen and offshore wind for its energy transition but will continue to extract oil and gas until 2050 and beyond,” the outgoing center-right government said as it presented its long-term energy strategy.

Offshore Wind

Offshore wind represents an industrial opportunity for Norway and may form an important part of the next chapter in our history as an energy nation,” said Tina Bru, the country’s minister of petroleum and energy, in presenting the white paper. The word ‘may’ in her statement could be telling for the depth of the government’s commitment to offshore wind energy, but Bru noted the recent tender announcement as an example of significant steps the government is taking to facilitate offshore wind power from both floating and bottom-fixed turbine installations. Licenses for two areas in the North Sea to accommodate up to 4.5 GW of wind power will be auctioned in the first quarter of 2022, according to Bru.

BP agreed on 14 June to join Statkraft and Aker Offshore Wind in a ‎consortium bidding in the 2022 auction. More than two dozen companies and consortia have submitted, or are planning to submit, tenders.

“We have listened to the industry, and we know making more acreage available is important. Therefore, the government will initiate a process of identifying new areas for offshore wind production and conduct an impact assessment of these areas. This will facilitate future activity and provide predictability for the industry,” said Bru, who also said the additional acreage could be identified within 2 years.

Hydrogen Roadmap

As part of the white paper, the Norwegian government published a roadmap for hydrogen, promising to establish hubs in the area of maritime transport and industrial use by 2025, and to boost research. The roadmap features specific ambitions for maritime hubs, industrial production, and multiple pilot projects.

In its revised national budget, the government proposed to strengthen financing for the development of infrastructure and markets for hydrogen and to establish a research center for environmentally friendly energy with a focus on hydrogen and ammonia.

The government also appointed a committee to look at how to develop the grid to handle the increased demand from industry at a time when Norway’s EV fleet is booming; it said national grid operator Statnett would operate the offshore grid to ensure neutral and efficient coordination and to support developers.

Expanding Oil and Gas

“The main goal of the government’s petroleum policy—to facilitate profitable production in the oil and gas industry in a long-term perspective—is firmly in place,” said Bru.

The white paper makes it clear that the petroleum sector will remain a significant factor in the Norwegian economy in the years to come, although not on the same scale as today. Yet, the short-term strategy looks like “business as usual.” The government said it will pursue its exploration policy with regular concession rounds and that it plans to continue the expansion of its oil and gas industry by handing out more licenses for fossil fuel exploration.

As evidence of its stated policy, Norway released 84 new oil and gas blocks under its Awards in Predefined Areas 2021 (APA 2021) licensing round. The blocks are in the North Sea, Norwegian Sea, and Barents Sea. Deadline for interested firms to submit applications is 8 September 2021. In January 2021, the ministry of petroleum and fossil energy awarded 30 oil companies with ownership interests in 61 production licenses on the Norwegian Continental Shelf. It plans to award additional new production licenses during the first quarter of 2022.

On 10 June, the day before the white paper was published, Equinor released forecasting that predicted global oil and gas demand in 2050—between 50 and 115 million B/D—could be almost the same as it was in 2019, at 100 million B/D.

“We will facilitate a future-oriented Norwegian oil and gas industry capable of delivering production with low emissions within the framework of our climate policy,” Bru said.

Key points for oil and gas policy include facilitating profitable production of oil and gas through predictable framework conditions such as:

  • Continued mapping of petroleum resources, also in areas not open to activity
  • Continued quota obligation and CO2 tax as the main instruments in climate policy

Awaiting a Vote

Norwegian lawmakers are expected to vote on the policy presented in the white paper following the summer recess. According to pundits, the government will need the support of either the left-wing Labor Party or the libertarian Progress Party, which sits on the right of Prime Minister Ema Solberg’s Conservative Party. Whether the policy will win either of those parties’ support is unclear.

“The government white paper failed to show how Norway can continue to develop oil and gas under a scenario where the world meets a climate goal of limiting the global temperature rise to 1.5 degrees, as set out in the Paris climate accord,” the opposition Labor Party said. Many believe Labor will win power in the September national elections, with the future of the oil industry a key issue for voters.

However, although critical of some of the government's priorities, Labor also believes Norway should continue to pump oil and gas and called the white paper “a basis to work on,” energy spokesperson Espen Barth Eide told Reuters. "We don't think we should stop producing oil and gas now and leave it for Russia or Qatar to supply, but we need to understand that the demand will go down. The main thing is to hit the market right and not end up with stranded assets," he said.

Norway sells its oil and gas abroad and puts the proceeds toward its $1.2-trillion sovereign wealth fund. It is expected to do the same with renewables. Almost all of its own electricity is generated from hydropower. The country is also a world leader in electric vehicle sales. Nearly half the cars sold there last year were electric.