Some intense gas diplomacy in recent weeks seems to have paid off. Not only have the president of the European Commission and Norwegian Prime Minister Jonas Gahr Støre agreed to set up a task force aimed at lowering gas prices, his government and Norway’s biggest oil and gas companies will also try to stabilize prices without setting any ceilings on them.
New stated intentions by both EU, Norwegian and industry officials come after months of international criticism that energy producers and Norway itself have been profiting enormously from Russia’s war on Ukraine. The war and Russia’s decision to use its own gas as a weapon, mostly by withdrawing it from the market, are largely blamed for the record-high gas prices that are causing great financial difficulty for households and businesses alike.
Money, meanwhile, has been pouring into gas companies, Norway’s state treasury and its huge sovereign wealth fund known as the Oil Fund. Even though the fund has lost value on its stock market investments this year (also because of the war) it’s still being pumped up by the oil and gas industry revenues that Norway has set aside for the benefit of future generations.
Things came to a head during the past week, when several European countries bluntly asked Norway to cut its prices for its gas. Norway is producing as much gas as possible, in an effort to offset the lack of Russian gas, but market prices remain high. Prime Minister Støre has stressed that neither he nor his government can set prices, only the companies themselves that in turn charge market rates.
It’s all led to fears that Norway’s international reputation is at stake. Newspaper Dagens Næringsliv (DN) also reported earlier this week that Norwegian diplomats abroad have sent anxious message home to Oslo, noting how “many already view us as war profiteers” and that Norwegian solidarity with the rest of Europe in supporting Ukraine dealing with the energy crisis was being questioned.
Støre, a former foreign minister who’s best known for his own diplomatic skills, continued to stress that Norway (which is not a member of the EU) remained open to discuss all European proposals for bringing prices down, even though only the oil and gas companies can actually do that.
“We have agreed to have even tighter dialogue with the EU over the various proposals on the table,” Støre said after yet another phone conversation with EU Commission President Ursula von der Leyen on Monday. “We’ll go into the conversations with an open attitude, but we’re skeptical about setting a maximum price on gas.” He contends that a ceiling on gas prices won’t tackle “the fundamental problem, that there’s too little gas in Europe.”
It was the second time the EU and Norwegian leaders had spoken directly about the energy crisis in less than a week, and just before she delivered her annual State of the Union address in Brussels on Wednesday. Støre noted that both Norway, now Europe’s largest gas supplier, and the EU will benefit from a more stable energy market.
Von der Leyen went on to compliment Norway during her address, after stating that the EU and its member states will develop a set of energy relief measures “that take into account the specific nature of our relationship with suppliers, ranging from unreliable suppliers such as Russia to reliable friends such as Norway.” She had earlier stated that the EU has “diversified away from Russia to reliable suppliers, the US, Norway, Algeria and others” before adding that “I have agreed with Prime Minister Støre to set up a task force” in an effort to lower gas prices. She added that the Norwegian and EU “teams” had already “started their work.”
Other measures to be evaluated include a “cap” on the revenues of EU companies that produce electricity at low cost, demands that the companies share profits with those who need them most, new efforts to raise more than EUR 140 billion to “cushion the blow” of huge bills, and “crisis contributions” from the oil, gas and coal companies that “are also making huge profits.” She said they would all be “emergency and temporary measures” while work continued “to lower gas prices.” Other highly debated proposals have also been made to put a ceiling on the price of Russian gas.
The goal, as von der Leyen has stated earlier, is “to cut Russia’s income that (Russian President Vladimir) Putin uses to finance his brutal war against Ukraine.” All of the proposals rolled out on Wednesday are aimed at keeping Europe (along with Norway and the UK that’s no longer in the EU) united and strong. “Much is at stake here, not just for Ukraine but for all of Europe and the world at large,” von der Leyen said. “We will be tested by those who want to exploit any kind of divisions between us. This not only a war unleashed by Russia against Ukraine. This is a war on our energy, our economy, our values and our democracy.”
‘Solidarity fund’ contributions sought
While sanctions that she described as “here to stay” have weakened Russia, Ukraine still needs not only military support but also massive amounts of money to rebuild everything from housing to schools and other buildings and infrastructure damaged by Russian bombing. That’s another area where Norway is likely to play an important role, with calls being made in Norway as well for contributions to a “solidarity fund” for Ukraine and now for Europe. Von der Leyen also promised measures to reduce overall electricity consumption, possible energy rationing this winter and investment in new forms of energy, in addition to the demands on a share of energy companies’ profits.
It remains highly unclear how that will work, and what authority the EU would have to effectively tax the oil and gas companies. Several professors, market analysts and not least oil and gas industry executives in Norway also claim Europe has erred for years in not boosting its own energy supplies. Now Von der Leyen is setting off what amounts to extensive reforms, at least, of European energy markets. The crisis measures and strong support for Ukraine remained her theme, and outlined the EU’s expectations of both members and non-members like Norway and the UK. The reforms would also affect Norway but Støre seems to have made sure Norway will have a voice in them. The EU will still consider a price ceiling on gas, but it wasn’t part of the initial package.
On Thursday both Støre and his Oil & Energy Minister Terje Aasland invited top executives from Norway’s state oil and gas company Equinor (formerly Statoil), Aker BP and Vår Energi to a meeting to discuss the energy crisis in Europe and “special situation” in the gas market. Norway’s new role as the largest single supplier of gas to Europe amounts to a “great responsibility for both the companies and the authorities,” Støre told reporters afterwards. “It’s in Norway’s interests that these markets stabilize.”
Among topics discussed were possibilties for more long-term sales contracts at a set price, perhaps even below the current market price. That could mean customers lock in to paying less now but perhaps more later if the market price drops. Customers thus face a lot of risk, but proposals are flying that perhaps state governments or authorities could offer guarantees or other means of reducing risk.
Lots more “dialogue” lies ahead, with DN reporting that Aker CEO Øyvind Eriksen was optimistic it would involve both private companies and government authorities in addition to customers. The pressure on Norway remains high, but doesn’t need to be acrimonious given Norway’s willingness to both support Ukraine and European allies.
Støre told DN that he doesn’t think Norway’s reputation has sunk to that of being a war profiteer, adding that the decision-makers with whom he’s dealt recently describe Norway as a “stable, predictable, long-term supplier” of energy. He added, however, that “the situation Norway is now in, where we’re more economically secure than many other countries, gives us extra responsibility, and we’re aware of that.”