Following several previous successful years, Norway once again saw record oil and gas profits in 2022, as well as progressing its renewable energy operations. With energy prices soaring last year, in response to the Russian invasion of Ukraine and the subsequent scarcity of oil and gas in Europe, Norway recorded significant profits throughout the year. The Nordic powerhouse quickly stepped in to provide gas to other European countries that were facing severe shortages, offering an alternative to Russia. Thanks to its favorable position in the international energy market, Norway expects to continue achieving record earnings throughout 2023, as well as developing its green energy capacity to support the gradual transition away from fossil fuels to renewables.
In October, Norwegian oil and gas firm Equinor announced record third-quarter profits, achieving $24.3 billion in the July-September period, and over $9.77 billion in the same period of 2021. This was largely due to increased post-pandemic demand and higher gas prices, which almost tripled since the beginning of the Russia-Ukraine conflict. This figure was greater than its previous earnings prediction of $23.5 billion.
Equinor’s CEO, Anders Opedal, stated “The Russian war in Ukraine has changed the energy markets, reduced energy availability and increased prices.” He added, “High production combined with continued high price levels resulted in very strong financial results.” Due to sanctions on Russian energy, Equinor became the main gas supplier to Europe in 2022, reducing Russian firm Gazprom’s market share.
Despite strong profits, Equinor expected to achieve a 1 percent growth in production in 2022 compared to the previous year, lower than the planned 2 percent rise. This was blamed primarily on delays on its Johan Sverdrup Phase 2 development, which was expected to commence operations in December instead of October. Equinor expects the new phase of Sverdrup to boost its crude output by 220,000 bpd.
And the Norwegian government believes the country’s success to extend well into 2023, with anticipated earnings from oil and gas of $131 billion for the year. This would set a new record, marking an 18 percent rise on 2022, and five times the earnings of 2021. It predicts an output average of 4.3 million bpd, over 4.1 million in 2022.
Although the Prime Minister, Jonas Gahr Stoere, has rejected calls for a price cap on gas, Norway has introduced a windfall tax on its oil and gas companies. Stoere believes that a price cap would not support the boost in production required to meet Europe’s high gas demand, as it continues to face shortages. However, taxes will be increased on Norwegian oil and gas by around $195 million in 2023, as the government reverses an incentive package offered during the pandemic, reducing the tax deduction from 12.4 percent to 17.69 percent. The introduction of the windfall tax responds to pressure from left-wing parties to increase taxes on companies that are depleting Norway’s natural resources, to tackle inflation.
While Norway’s oil and gas industry continues to boost its fossil fuel production and see record profits, there are concerns about the ongoing reliance on energy sources with high greenhouse gas emissions. Since 2020, Norway has run almost entirely on renewables. But it still operates large-scale, highly profitable oil and gas projects in response to the growing global demand for energy. For a country that strives to be a world leader in renewable energy and a forerunner in the transition to green, it still relies heavily on its oil and gas wealth. Norway is the seventh wealthiest country by GDP per capita, and has seen its earnings soar over the last year thanks to oil and gas. This helps it pump funds into renewable energy capacity development, as well as supporting other countries in their development. Yet, it is at the cost of the environment.
By Felicity Bradstockfor Oilprice.com
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