The war devastates Norway’s oil and gas profits. Now it is asked to help

Europe’s frantic search for alternatives to Russian energy has dramatically increased the demand – and the price – for Norwegian oil and gas.

As the money pours in, Europe’s second-largest natural gas supplier is pushing back against accusations that it is profiting from the war in Ukraine.

Polish Prime Minister Mateusz Morawiecki, who is counting on the Scandinavian country to replace some of the gas Poland was getting from Russia, said Norway’s “gigantic” oil and gas profits “feed indirectly from the war”. He urged Norway to use this windfall to support the hardest hit countries, primarily Ukraine.

Last week’s comments struck a chord, even as some Norwegians question whether they are doing enough to fight Russia’s war by increasing economic aid to Ukraine and helping neighboring countries put end their reliance on Russian energy to power industry, generate electricity and power vehicles.

Taxes on the windfall profits of oil and gas companies are common in Europe to help people cope with soaring energy bills, now exacerbated by war. Spain and Italy have both endorsed them, while the UK government plans to introduce one. Morawiecki asks Norway to go further by sending oil and profits to other nations.

Norway, one of Europe’s richest countries, spent 1.09% of its national income on overseas development – one of the highest percentages in the world – including more than $200 million aid to Ukraine.

With oil and gas coffers swollen, some would like to see even more money earmarked for mitigating the effects of war – not taken from funding agencies supporting people elsewhere.

“Norway has made severe cuts to most UN institutions and to support for human rights projects to fund the cost of hosting Ukrainian refugees,” Berit Lindeman said. , political director of the human rights group, the Norwegian Helsinki Committee.

She helped organize a protest on Wednesday outside parliament in Oslo, criticizing the government’s priorities and saying the Polish remarks had “some merits”.

“It looks really ugly when we know revenue has skyrocketed this year,” Lindeman said.

Oil and gas prices were already high amid an energy crisis and soared because of the war.

Natural gas is trading at three or four times what it was at the same time last year. The international crude oil benchmark Brent rose above $100 a barrel after the invasion three months ago and has rarely dipped below since.

Majority state-owned Norwegian energy giant Equinor earned four times as much in the first quarter compared to the same period last year.

The bounty led the government to revise its revenue forecast from oil activities to 933 billion Norwegian kroner ($97 billion) this year, more than three times what it earned in 2021.

Most of it will be funneled into Norway’s huge sovereign wealth fund – the largest in the world – to support the nation when the oil runs out. The government does not plan to divert it elsewhere.

Norway has “provided substantial support to Ukraine since the first week of the war, and we are preparing to do more,” State Secretary Eivind Vad Petersson said by email.

He said the country had sent financial support, weapons and more than 2 billion crowns in humanitarian aid “regardless of oil and gas prices”.

European countries, meanwhile, have helped inflate Norwegian energy prices by trying to diversify their supply away from Russia. They were accused of helping to finance the war by continuing to pay for Russian fossil fuels.

This energy dependence “provides Russia with a tool to intimidate us and use it against us, and this has been clearly demonstrated now”, NATO Secretary General Jens Stoltenberg, former Norwegian Prime Minister, said during the meeting of the World Economic Forum in Davos, Switzerland. .

Russia has cut off natural gas to Finland, Poland and Bulgaria for refusing a request for payment in rubles.

The 27-nation European Union aims to cut dependence on Russian natural gas by two-thirds by the end of the year through conservation, renewable energy development and alternative supplies.

Europe is begging Norway, along with countries like Qatar and Algeria, to help fill the gap. Norway provides 20 to 25% of Europe’s natural gas, compared to 40% for Russia before the war.

It is important that Norway “is a stable and long-term supplier of oil and gas to European markets,” Deputy Energy Minister Amund Vik said. But the companies are selling in volatile energy markets, and “with the high oil and gas prices seen since last fall, companies have been producing close to the maximum of what their fields can supply on a daily basis,” it said. he declared.

Even so, Oslo has responded to European calls for more gas by granting permits to operators to produce more this year. Tax incentives mean companies are investing in new offshore projects, with a new pipeline to Poland opening this fall.

“We are doing everything we can to be a reliable supplier of gas and energy to Europe in these difficult times. It was a tight market last fall and it’s even tighter now,” said Ola Morten Aanestad, spokesperson for Equinor.

The situation is a far cry from June 2020, when prices crashed following the COVID-19 pandemic and the previous Norwegian government gave tax incentives to oil companies to boost investment and protect jobs.

Combined with high energy prices, the incentives that run out at the end of the year prompted Norwegian companies to publish a series of development plans for new oil and gas projects.

Yet these projects will not produce oil and gas until the end of this decade or even further into the future, when the political situation could be different and many European countries hope to have displaced most of their consumption of energy to renewable energies.

Until then, Norway will likely face the most familiar criticism of contributing to climate change.