Oil outlook shrinks as revenues sink

Bookmark and Share

Norway’s offshore oil revenues have made it a wealthy country, but their future is murky at best. Now even one of the oil industry’s traditional allies, the International Energy Agency (IEA), thinks Norway and all other nations should stop searching for more oil and gas, just after reports that the country’s income from oil and gas activity already sank last year to its lowest level since 1999.

Large offshore oil fields and installations like Johan Sverdrup in the North Sea will help provide more than enough oil and gas for a future with net-zero emissions, according to a new report from the International Energy Agency (IEA). It claims no further oil and gas exploration or development is necessary. PHOTO: Equinor

The IEA’s report was grabbing attention in Norway on Tuesday, as business cranked up after a five-day holiday weekend. The IEA, created in 1974 to help respond to major disruptions in the oil supply, is made up of 30 member countries including Norway plus eight associated countries.

Now it’s basically recommending that Norway and other oil- producing nations drop oil and gas exploration and concentrate instead on existing oil fields. That’s the only way, the IEA reckons, that the international climate goal of limiting global warming to 1.5 degrees can have an “even chance” of being met.

“The fact that this is coming from the oil and gas sector’s friends makes me think this will change the discussion (about the search for new oil and gas sources) a lot,” Glen Peters, director of research at Norway’s Cicero Center for International Climate Research, told Norwegian Broadcasting (NRK).

In its newly released “Roadmap for the Global Energy Sector,” the IEA notes that carbon emissions must decline rapidly between now and 2030, and to zero in 2050. The IEA has examined what that will mean for energy supplies, industry, transport and climate technologies like carbon capture and storage. The IEA is now keen to steer its members and the world towards a “clean energy transition” with a “net zero energy system by 2050, while ensuring stable and affordable energy supplies, providing universal energy access and enabling robust economic growth.”

Among the IEA’s conclusions: Oil, coal and gas consumption must fall quickly. So quickly that the world, according to the IEA, already has all the oil and gas it needs. No further exploration will be necessary, it believes. The IEA’s “roadmap” includes more than 400 “milestones to guide the global journey to net zero by 2050.” They include, from May 2021, “no investment in new fossil fuel supply projects,” not least because there are to be “no sales of new internal combustion passenger cars by 2035.”

That’s bad news for Norway’s offshore service industry, for drilling equipment and oil drilling platforms. It’s also bad news for oil companies and investors, including many in Norway, who still want to exploit Norway’s Arctic areas in the Barents Sea. The IEA’s “roadmap” also sees no need for new coal mines or new unabated coal plants. The electricity sector, also important in Norway, will be expected to have reached net-zero emissions by 2040. The IEA’s plan “requires the immediate and massive deployment of all available clean and efficient energy technologies and annual additions of solar and wind power.”

The IEA’ report is expected to have major impact since its analyses are used by governments and companies around the world. NRK noted that the agency has earlier been criticized for being too oil-friendly and for not paying enough attention to renewable energy. That’s changed.

“I was quite surprised that they are so clear that there is no need for more oil, coal or gas,” said Peters of Cicero.

‘No comment’ from Norway’s oil minister
The IEA is also setting a course that derails what the Norwegian government, with support from several parties in opposition in Parliament, plans to do in the years ahead. Norwegian Oil Minister Tina Bru said earlier this year that Norway will continue to keep searching for more oil and gas, claiming that’s still possible despite the zero emission goals by 2050. The government based its plans on a UN report from 2018, which suggested oil consumption would fall by 66 percent and gas by 40 percent. The IEA thinks the fall in consumption will be much more: 75 percent for oil and 55 percent for gas.

Oil Minister Tina Bru, who recently offered 136 new licenses for oil exploration in the Arctic, initially declined comment on the IEA’s new report. Her state secretary told NRK that Norway would not be reversing its oil policy, or halting exploration. PHOTO: OED

“The IEA is directly saying that we don’t need any new projects, and should rather concentrate on those already underway and reduce their carbon footpring,” Thina Saltvedt, who’s worked as an oil and energy analyst for years, told NRK. “We won’t need as much oil and gas as we thought.”

The IEA’s report was joyfully received by Norwegian climate activists and politicians who’ve been trying to rein in the oil industry for years. Lars Haltbrekken, a Member of Parliament for the Socialist Left party (SV) quickly called for a halt to all new oil and gas licensing. Oil Minister Bru initially declined an interview but her state secretary, Tony Tiller, said the IEA’s report shows how important economic restructuring in Norway will be. He stressed how Norway itself relies mostly on its hydro-electric power, already has a high percentage of electric cars and is developing more carbon capture and storage.

He claimed, however, that Norway would not be reversing its policy now, even though revenues are falling (to NOK 109 billion last year) and last year’s tax relief for oil companies is proving costly.

“We have a long-term perspective on that,” Tiller said, noting that the IEA’s report notes there will still be a need for oil and gas, “also in a future with net zero emissions.”

newsinenglish.no/Nina Berglund