Norway’s Arctic oil and gas pitch to Europe is built on exaggeration, not energy security
Norway's prime minister Jonas Gahr Støre has been vigorously touring the continent since the start of the US-Israeli war with Iran, telling everybody who wants to listen that Norway's Arctic oil and gas are crucial for Europe's energy security. But is it?
Norway’s prime minister Jonas Gahr Støre has been vigorously touring the continent, telling everybody who wants to listen that Norway’s Arctic oil and gas are crucial for Europe’s energy security. “We increased our gas exports to the EU when the war in Ukraine broke out, and all of that increase came from the Arctic,” hetoldthe Financial Times earlier this month, in the context of another energy crisis, this time caused by the US-Israeli war with Iran. That same week, he met the commissioner for international partnerships, Josef Síkela, and the EU’s special adviser for the Arctic, Jyrki Katainen, to offer them “the Norwegian perspective on the region,” said people familiar with his agenda. Norway’s pitch is that its oil and gas are cleaner and more secure than supplies from the US or the Middle East. But for Europe to really benefit, it first needs to drop its moratorium on new Arctic oil and gas projects, set out in theEU’s 2021 Arctic strategy, which is up for review later this year. “European countries must make their decisions,” otherwise “it goes somewhere else,” Størereportedlysaid. The question is: how important is Artic supply for Europe, really?Støre’s claim that all new supply during 2022 energy crisis came from the Arctic, was false, it turns out. Norwegian newspaper Dagens Næringslivreportedlast week that Arctic supplies accounted for less than half of the increase because, in fact, the Hammerfest plant was offline for much of that first war year after a major fire destroyed parts of the facility in 2020. No matter, the energy ministry later told the newspaper. The point was that “Norway increased gas deliveries to Europe during an extremely challenging period. ”“Norway has been Europe's most important single supplier of gas throughout the energy crisis,” the ministry also said. This is of course true. Norway’s government reported record petroleum revenues of NOK 1457bn (€144bn) in 2022, equivalent to 26 percent of GDP and roughly triple the previous year, driven by surging oil and gas prices and higher exports to Europe. Almost nothing of this came from the Artic. At any given year, Hammerfest, Norway's only Arctic gas project serving Europe, accounts for only about one to two percent of EU gas imports. Even a doubling of this contribution would barely change the EU’s supply picture. Yet even that would require major new Arctic oil and gas developments in some of Europe’s most costly and environmentally sensitive frontier areas. Even so, Norway is charging ahead. The state heavily incentivises exploration risk-taking in northern regions by footing up to 78 percent of the exploration bill. One of the most significant fields still to come is Wisting, a large offshore field in the northern Barents Sea that would extend production in the region by decades if developed. State-controlled Equinor is currently weighing whether to move ahead with development, but industry expectations are that it will move ahead at the end of next year. An open question is whether the project will be profitable enough. Støre, in any case, is doing his utmost to make sure that there will be future European buyers.