EXPLAINED: What is Norway doing to help ease the European energy crisis?
Norway, a major energy producer and supplier, is well placed to help ease the European energy crisis. But what exactly is it doing to help alleviate the problem?
Prior to the invasion of Ukraine, Norway was already a leading energy exporter, mainly thanks to its hydroelectric dams.
The country also has long-been Europe’s biggest supplier of natural gas, behind Russia. However, since the cut in natural gas supplies from Russia following its invasion of Ukraine, Norway has emerged as Europe’s leading supplier.
Throughout the summer, Norway’s offshore platforms have run at full capacity to try and make up for some of the shortfalls caused by Russian cuts to the gas supply. Typically, production is slowed in the summer to allow maintenance to be carried out.
“The most important contribution Norway can make in the current situation is to maintain high gas production,” oil and energy minister Terje Aasland told parliament last month.
According to the minister, the country will increase its exports by around eight percent this year. According to the oil and energy minister, Norway should therefore produce around 122 billion cubic metres in gas.
In addition to its gas production, the country continues to send energy produced by hydroelectric dams to the continent via power export cables in record amounts due to higher prices in Europe, making the practice profitable.
Despite this, there are still concerns that Norway could do more to help ease the energy crisis across Norway.
Currently, Norway is incredibly well placed to profit from its increased gas production. Projections from Nordea markets estimate that the country’s oil and gas revenues could reach 1.9 trillion kroner by next year.
Across Europe and domestically, there are concerns that Norway could be seen as a war profiteer due to the windfall generated by increased oil, gas and energy prices.
There have also been fears that Norway could limit energy exports to Europe due to concerns over the security of its own energy supply throughout winter and low filling levels in hydroelectric reservoirs. The Norwegian government has examined how the country could do this while respecting its agreement with the EEA (European Economic Area).
One way that those on the continent believe Norway could help alleviate the current issue would be to introduce a price cap on the gas it exports.
Last week, Norwegian Prime Minister Jonas Gahr Støre told the Financial Times that the country would potentially be open to a price cap and long-term gas agreement to help its European partners.
“I fully understand that Europe now has a profound debate about how energy markets work, how they can secure more affordable prices for citizens, families, industries, and how this shortfall of gas after Putin’s aggression can be handled,” Prime Minister of Norway, Jonas Gahr Støre, told the newspaper.
“Norway is not closing doors to any such discussion,” he added.
Norway’s PM did warn, however, that the EU should be wary of implementing measures which could threaten the security of power supplies.
However, this weekend he reiterated that it is not the Norwegian government that can directly offer Europe a capped price on gas. He has also moved to clarify that he is open to assessing all the solutions that the EU puts forward, not just price caps and price agreements.
“I tell my European colleagues that it is not me who sells the gas. Licenses are given to companies that pay a high tax, and then they are the ones who sell it,” he told Norwegian newspaper VG this weekend.
He added that the most important thing Norway could do for the time being was to continue delivering as much gas as possible to European markets.
“Now the crisis and what I call the war economy are hitting so hard that they are facing immediate challenges. I am keen that we continue to show that we can deliver gas at a stable high level,” he said.
Aside from keeping output high, Norway’s PM told the newspaper it would collaborate with Europe to try and ease the crisis.
“Yes, we will participate actively in the collaboration to find both short-term and long-term solutions to the electricity crisis, and we can share our knowledge of the electricity market. NHO (Confederation of Norwegian Enterprise) has today (Saturday) had all its Nordic associations in place in Oslo. I have spoken to them. The Nordic countries have experience with the exchange of electricity that Europe has looked to, because it has proven to provide stability and low prices over time,” he told the paper when asked whether Norway could do anything more to help.
Støre also explained that companies in Norway seemed open to the prospect of longer-term gas agreements.