Cookie Consent by Free Privacy Policy Generator
4.2 C
Oslo
Thursday, March 28, 2024

EU gas strategy may hurt Norway

Almost all of Norway’s gas is exported to Europe, but that could be set to change under the EU’s new gas policy. The EU is working to improve its own energy security, following the 2009 gas crisis and conflict between Ukraine and gas-rich Russia.

Statoil will use its established pipeline system to send natural gas from the Norway to Germany. PHOTO: Statoil/Helge Hansen
Norway exports almost all of its gas to Europe through pipelines. It’s a major industry, making up more than a quarter of all Norwegian exports. Now the EU is seeking to become more dependent on its own energy resources, so its not left vulnerable to energy supply cuts. PHOTO: Statoil/Helge Hansen

The EU’s supply security plans are due to be considered at a summit at the end of June. Europe has to “stress test” its own supply before next winter, to see what would happen if Russia cuts supply reported newspaper Aftenposten.

Russia’s invasion of the Crimean peninsula has created uncertainty about ongoing supply to the EU. Currently Russia supplies 39 percent of Europe’s gas needs, Norway 34 percent, and Algeria 14 percent. The EU has to import 53 percent of its energy, including oil and gas, at a cost of one billion euros a day.

It was feared brokering meetings last week between Russia, Ukraine and the EU over Ukraine’s gas bill to Russia were not successful. If the conflict between Russia and Ukraine’s new regime continues, Europe was concerned gas supplies would be broken.

The proposal includes measures to improve self-supply and infrastructure, use more energy sources, and increase energy solidarity between member states. It’s all designed to decrease dependency on countries outside the EU, including Norway. Through an extensive pipe network, Norway exports more than 100 million cubic metres to EU countries each year. Last year that was valued at NOK 245 billion (USD 41.1 billion), accounting for 27 percent of all Norwegian exports.

In limbo
While Norway is known as a “reliable” EU partner, it is no longer certain that Europe will take all the gas Norway can supply as it seeks to diversify its sources. Gas exports to Europe had accounted for a growing share of Norway’s export earnings, but now the EU countries want to develop enough energy of their own to create competition and drive prices down.

“It is unclear how much the EU has a need for in the long term, and what Norway’s share of that should be,” Karen Sund of consultancy firm Sund Energy told Aftenposten. “Moreover, Norway’s role in the EU/EEA is unclear. Sometimes we are treated like we are members of the EU, other times not. We are in limbo.”

“Norway has invested heavily in delivering gas to Europe through pipelines,” said Thina Saltvedt, Nordea Markets’ head oil analyst. “If the EU sharply cuts gas imports, it will impact us hard.”

Saltvedt said gas was going to become a more important revenue source, eventually worth more than oil, as oil production on the Norwegian continental shelf falls away. However, she said Norway didn’t have a lot of options over which countries it could supply gas to. Currently 95 percent is exported through pipelines to Europe, 4 percent is cooled and transported by ships as LNG, and 1 percent is consumed in Norway.

“We have very little flexibility over who we can deliver gas to,” she said. “Moreover it is significantly more expensive to freeze gas and send it by ship rather than pipe. We are totally dependent on Europe’s imports.”

Stable partner
The Ministry of Oil and Energy said it was not concerned by Europe’s plans. “Norway is a stable and predictable energy supplier to the EU,” Einar Holmen, an advisor within the ministry, told Aftenposten. “This is emphasized constantly by the EU and also in the Commission’s plan. The EU want to strengthen the bonds with stable partners, where Norway is specifically named. There is not reason to believe that the EU will have less of a need for energy cooperation with Norway going forward, on the contrary.”

Europe’s ability to create its own gas depended on easing the ban against shale gas developments in Germany, and exploring possibilities in Poland and Denmark. Great Britain planned to start harvesting its own gas by 2017.

“This can go both ways for Norway,” said Saltvedt. “The more the EU countries can produce themselves, the greater the competition will be for Norway. At the same time, this can lead to gas strengthening its position as an energy source, something which will provide increased infrastructure development. It may increase demand – for Norway’s gas as well.”

“Norway is emerging as a safe and stable supplier compared with countries like Russia, Libya and Egypt,” she continued. “Moreover new environmental requirements can be positive for the position of gas because sun and wind will not be able to replace all fossil fuels. To reach the goal of climate targets, gas can therefore play a more central role.”

newsinenglish.no/Emily Woodgate

LATEST STORIES

FOR THE RECORD

For more news on Arctic developments.

MOST READ THIS WEEK

Donate

If you like what we’re doing, please consider a donation. It’s easy using PayPal, or our Norway bank account. READ MORE