NORWAY DOUBLES UP ON OIL AND GAS

After reaching record levels this year, investment in the Norwegian oil and gas industry is expected to increase further in 2025. Increased greenfield development activity and inflation have contributed significantly to the growth of investment in the Norwegian oil and gas sector in 2024.

According to the country's statistics office, the volume of investment in the Norwegian oil and gas industry will be around $22.9 billion this year, a record figure in the country's history. The previous record was $20.4 billion in 2014, when oil prices were very high and companies were still spending large sums on new oil and gas projects. The surge in investment has contributed to new geological exploration, oil transportation through pipelines, and well closures and decommissioning.

The Scandinavian oil superpower is expected to continue investing heavily in fossil fuels in the coming years. Oil and gas companies operating in Norway plan to invest about $24.68 billion in 2025, industry association Offshore Norge said in December. The group surveyed 14 companies, including Equinor, Aker, Vår Energi, ConocoPhillips and Shell, which account for nearly all of the country’s oil and gas production. The companies plan to start drilling 45 exploration wells in Norwegian waters in 2025, up from 41 this year and the highest number since 2019.

The increase in new exploration projects reflects increased demand for natural gas from Norway following Russia’s invasion of Ukraine and subsequent sanctions on Russian oil. Norway is Western Europe’s largest oil and gas producer, producing more than 4 million barrels per day, and the government intends to continue increasing production for several decades.

In December, Vår Energi and Equinor announced the discovery of a new oil discovery at the Cerisa exploration well near an operating asset in the Barents Sea. Operators estimate recoverable oil volumes at between 1.3 million and 4.8 million standard cubic meters. This is the fourth consecutive discovery in the region. Along with previous discoveries in the Gjøa North and Ofelia/Kyrre fields, Cerisa could be linked to the Gjøa field using existing infrastructure in the area. This would allow for a total gross recoverable resource of up to 110 million barrels.

In addition to the new exploration in Norwegian waters, Equinor also announced in December its intention to form a new 50/50 joint venture with Shell that would combine their UK fossil fuel assets to create the largest independent oil and gas producer in the UK’s North Sea. In a joint statement, the two companies said the new facility would help “support domestic oil and gas production and the security of the UK’s energy supply.” The statement continued: “With the once prolific basin maturing and production naturally declining, the combined portfolios and expertise will continue the economic recovery of this vital UK resource.”

Norway justifies its expansion in the oil and gas sector by investing in “low-carbon” oil projects that include decarbonization methods, as well as significant investments in green energy projects. Norway is currently Europe’s largest supplier of oil and gas with the lowest emissions. This is largely due to the electrification of the country’s mining operations using hydropower, which Norway is abundant in. By 2026, Wood Mackenzie predicts that over 60% of Norway’s production will be electrified.

New energy market research by researchers Rystad Palzor Shenga and Elliot Busby shows that electrifying fossil fuel production could significantly reduce emissions from oil and gas production. The study shows that over 80% of emissions from oil and gas production facilities could be reduced by using renewable electricity or natural gas that would otherwise be flared.

Shenga, vice president of exploration and production at Rystad, said: “As the world faces the urgent challenge of climate change, the oil and gas industry is increasingly under pressure to minimize its carbon footprint and align its practices with global sustainable development goals. Where possible and economically feasible, electrification has great potential to reduce emissions while maintaining production volumes.”

Norway has invested heavily in renewable energy in recent years. Its electricity grid runs almost entirely on green energy sources and it also finances projects in other parts of the world. For example, in June, Norway’s sovereign wealth fund took a $418 million stake in the UK’s 573 MW Race Bank wind farm. The Norwegian Investment Fund for Developing Countries also announced a $19.9 million investment in three wind farms totaling 420 MW in South Africa, to be built by EDF Renewables.

However, many question whether Norway should be seen as a climate hero or a carbon villain. The International Energy Agency has repeatedly stated that further fossil fuel exploration is not consistent with its scenarios for reaching net-zero emissions by 2050, meaning that Norway’s investments in oil and gas are not consistent with its green transition goals, despite its efforts to decarbonize and offset carbon emissions. However, it seems that Norway wants to have its piece of the cake and eat it, continuing to invest heavily in oil and gas and making a strong commitment to decarbonization and the green transition.