It is better to rely on oneself than to rely on others. After Gazprom cut off gas supply and failed to seek gas from Canada, Norway has become Europe’s largest source of natural gas. In this country with a long and narrow coastline, offshore oil and gas are important economic pillars and major export products. But even so, high gas prices are still the biggest problem. Under the impact of high temperature and drought, the European continent will face an unknown winter.
The new largest gas source
Since the conflict between Russia and Ukraine, Western countries have imposed multiple rounds of sanctions on Russia, and Russia’s natural gas supply to Europe has dropped sharply. European countries have begun to formulate and implement plans to gradually get rid of their dependence on Russian natural gas and other energy sources, and have sought alternative sources of supply.
On August 23, local time, Norwegian Petroleum and Energy Minister Terje Osland said that Norway plans to maintain the current high production of natural gas in the country until 2030 to meet the increased demand from Europe looking for an alternative supply source of Russian natural gas.
“I expect that we can maintain the current level of gas production through 2030,” Osland told Reuters in an interview. “We know there are several development and operations projects and plans coming up that will help continue to maintain high gas production. .”
According to Refinitiv-Ikon data, Norway has now replaced Russia as Europe’s largest source of natural gas. According to an official forecast made by Norway in May, the Nordic country’s natural gas production this year is expected to break the record set five years ago, reaching about 122 billion cubic meters, an increase of 8% from last year.
Osland said the agreement signed by the European Union and Norway in June to increase Norwegian gas imports has made him more convinced that Europe has a “long-term demand” for Norwegian gas. Norway’s energy ministry also said last month that it had agreed to revise licenses for some of the country’s natural gas fields. This will allow Norway to produce natural gas at full capacity.
This offers a glimmer of hope for Europe, which is at the “epicenter” of the energy crisis. It is understood that Norway’s supply accounts for about 25% of the total natural gas supply in Europe.
But there is no free lunch in the world, and it still costs a lot to get this part of natural gas. European natural gas prices have almost tripled this year, setting records several times. Compared with the same period last year, European gas prices rose 15 times this week. Norway’s natural gas exports hit a record high of 128.4 billion crowns ($13.26 billion) in July, according to official data released last week.
Statistics Norway said the country’s gas revenue in July was four times higher than a year earlier, while gas sales rose 5.7 percent to 10.2 billion cubic meters. Some market analysts and media have suggested that Norway sell gas at below-market prices, but Norway has no intention of doing so.
unknown winter
An Guangyong, an expert member of the Credit Management Committee of the All-China Mergers and Acquisitions Association, told a reporter from Beijing Business Daily that although Norway’s supply can alleviate the current European energy crisis to a certain extent, after all, Norway’s share was only 25% before. The problem is not enough.
Many countries are also aware of this. As the largest natural gas consumer in Europe, Germany does not hesitate to restart thermal power to fill the gap, or even to seek gas across the ocean. German Chancellor Scholz visited Canada from 21 to 23. During this period, Scholz and Canadian Prime Minister Justin Trudeau signed a hydrogen energy cooperation agreement to promote Canada’s export of hydrogen to Germany as early as 2025. This will create a “transatlantic hydrogen supply chain” to help Germany and even the whole of Europe reduce its dependence on Russian energy.
Scholz’s trip also discussed the possibility of Canada increasing LNG exports to Germany, hoping to fill the energy gap in Germany due to the “cutting supply” of Russian natural gas, especially to meet the looming winter heating demand. It is understood that in order to increase supply to Europe, Canada has begun to implement a plan to increase its natural gas export capacity, with a maximum daily increase of 100,000 barrels of crude oil equivalent by the end of the year.
However, far water is difficult to quench thirst near. Canada has no ready-made LNG export terminals, and two are under construction on the Pacific coast. They are scheduled to be completed in 2025 and 2027.
According to Reuters, a source familiar with the discussions between the two sides said that the process of building a new LNG export terminal on the Canadian side has not been accelerated by the discussions between the two sides, and Scholz has a clear understanding of the relevant timeline. It’s just that the German side is eager to fill the gas gap caused by Russia’s supply reduction this winter, and is eager to find “gas”, “anywhere will do.”
In addition, Gazprom said it will close the Nord Stream 1 pipeline for three days from August 31 due to maintenance needs. This makes the supply of Gazprom even worse.
Ensuring energy security is the EU’s current top priority. But in addition to natural gas, the drought has also affected hydro and nuclear power generation. Statistics from Norwegian consulting firm Rystad Energy show that in the first seven months of this year, Europe’s hydropower generation decreased by 20% compared with the same period last year, and nuclear power generation decreased by 12%.
Beyond the energy crisis
Under the current circumstances, the EU’s ambition to tackle climate change is facing many difficulties. Although Germany and other countries have recently reiterated that they will keep their greenhouse gas emission reduction targets unchanged, how to find a balance between solving the current energy supply and easing future heat and drought has become a difficult problem for the EU.
At the same time, the drought has severely affected inland shipping in Europe. Many barges are required to transport coal for power plants and raw materials for industrial enterprises such as steel and chemicals. But barges on the Rhine can only operate at 25% capacity due to falling water levels.
In An Guangyong’s view, there are two solutions, namely throttling and open source. One is to reduce the energy consumption of European users, and the other is to find other natural gas channels, or find other alternative energy sources, such as nuclear power, wind power, hydropower, oil, fossil fuels, solar energy and so on.
An Guangyong further analyzed that for the former, Europe has been negotiating with other major energy suppliers such as Saudi Arabia and the United States, but due to various geopolitical reasons, the effect is not very obvious. For alternative energy sources, there are more or less problems. For example, many countries have to restart nuclear power plants due to the energy crisis, but this also takes time. And new energy sources such as wind energy, hydroelectric power generation, solar energy, etc., have very limited power generation efficiency per unit area, which can only be regarded as a drop in the bucket for the current energy shortage.
However, under the impact of high inflation and energy crisis, the economic outlook in Europe has become increasingly bleak, and the risk of recession has further increased. According to the Oxford Economics report, European economic growth momentum is weakening in the second half of 2022 as high inflation, energy-saving measures and tightening financial conditions increasingly weigh on economic activity.
An Guangyong said that although the gas shortage occurred in Europe, if it continues, it will affect the global economy. Because economic globalization has made the whole world one, and Europe occupies an important position here, its destructive power will be great.
However, it also means that a new balance will be formed. An Guangyong believes that the economic depression that may be brought about by the energy shortage will also reduce its demand, thus reaching a new balance. In addition, the Russian-Ukrainian conflict is also beginning to reorganize the global energy map.
Beijing Business Daily reporter Tao Feng Zhao TianshuReturn to Sohu, see more
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