Norway’s Oil Boom Is Only Just Beginning 

• Norway’s revenues from oil and gas production hit a record high this year and are showing no signs of slowing down
• While Norway is a major supporter of clean energies, it is also a firm believer that the energy transition can only be achieved by using the profits from oil and gas production 
• The future is bright for Norway’s energy giant Equinor, which will be able to take advantage of growing energy demand and play a leading role in the coming energy transition 

Norway’s oil and gas production is at an all-time high, bouncing back solidly from a year of pandemic restrictions and curbs on production. Norwegian firm Equinor is running the show with oil and gas revenues doubling and new discoveries by the company suggesting that Norway will continue to produce fossil fuels well into the coming decades.  As the oil industry was battling with Covid-19 pandemic restrictions and the severe decrease in oil demand throughout 2020, Norway was able to weather the storm thanks to tax breaks on oil and gas firms, allowing them to come back stronger in 2021. These actions by the government have been criticized by environmental activists hoping for a swifter transition to renewable energy. But for a country founded on oil revenue, it is hardly surprising that Norway wants a continuing piece of the action as post-pandemic oil demand rises. 

Norwegian Prime Minister Jonas Gahr Støre believes that a total end to oil exploration and production would harm the transition to renewable alternatives in a world still so reliant on oil and gas. He stated, "If we were to say from one day to the other that we close down production from the Norwegian shelf, I believe that would put a stop to an industrial transition that is needed to succeed in the momentum towards net zero . . . So we are about to develop and transit, not close down."

Norway has also been one of the largest suppliers of gas to Europe, second only to Russia, as shortages across the region have driven gas prices to record highs. The huge gas producer earned an estimated $7.9 billion in gas revenues in October thanks to the significant hike in prices. The Norwegian government continues to support gas production as a cleaner alternative to coal in the transition to alternatives.

As Norway ramps up its oil production to meet increasing global demand and as several countries come out of pandemic restrictions and businesses start up again, the country’s oil output has been exceeding forecasts month on month. Crude oil output reached 1.82 million bpd in October, up from 1.77 million in September. Natural gas output also went up, achieving 10.4 billion cubic meters of production in October, up from 8.9bcm in September.

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As output increases, so do revenues. Norway’s oil major, Equinor, more than doubled its revenues in the third quarter of 2021, compared to the same period in 2020, thanks to rising gas prices and increased oil demand. Net profits rose to $1.4 billion between July to September, according to the company

Equinor’s oil outlook is optimistic, as the company announced its 6th discovery in domestic waters this year in November. The find, north of the Tyrihans field off the coast of Norway, is thought to hold 62 billion barrels of crude. Equinor stated of the development, “Such near-field discoveries are profitable, robust against fluctuations in oil (and) gas prices, they have a short payback period and low emissions.”

Despite ongoing growth in its oil operations, the company is not shying away from the energy transition, with plans to invest $23 billion in renewable energy by 2026. Equinor aims not only to be an international major in low-carbon oil production and carbon capture and storage technologies but also to become a market leader in wind and solar power. As Equinor continues to provide vital oil and gas supplies to Europe at a time where prices are rising to unprecedented levels and several countries are facing energy shortages going into winter, the company is optimistic about its role in traditional energy provision as well as its ability to use profits to invest in the long-term transition. 

Following months of increased production and record export levels, Norway’s oil and gas companies announced they are now increasing their investment forecasts for 2022. Tax incentives from the government to support increased oil output are part of the drive, as a national statistics office (SSB) survey showed that Norway’s largest business sector now hopes to invest $17 billion in 2022, instead of the planned $15.6 billion. Tax incentives over the coming year are expected to spur a two-figure percentage growth in investments in 2023.

There is no end in sight for Norway’s oil and gas industry, which continues to get stronger every year, despite production curbs and revenue losses during the pandemic. And with Equinor also investing heavily in renewables, it is certainly not a one-trick pony. Norway’s future in energy is looking increasingly certain, with Europe’s oil and gas demand not showing any sign of waning, Equinor appears to be the star of the show.

By Felicity Bradstock for Oilprice.com

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