Norway's oil faces growing risks amid global energy shifts, expert warns

Norway's position as a major energy exporter faces a diverging outlook for its oil and gas sectors, with natural gas remaining a strong export commodity while oil faces increasing global risks. Sverre Alvik, research leader for energy transition at DNV, highlighted this disparity, noting that while gas exports to Europe are expected to remain robust for decades, oil is subject to greater volatility.

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We see a lasting change and it comes from two things. One is the purely economic effect and the other is the psychological effect.

Alvik pointed to the ongoing crisis in the Hormuz Strait, triggered by the Iran conflict, as a significant factor. Initially expected to be short-lived, the prolonged disruption has led to higher oil prices, which in turn are accelerating a permanent reduction in oil demand. This effect is compounded by the rapid electrification of vehicle fleets worldwide, a trend now extending to less mature markets.

"We see a lasting change and it comes from two things. One is the purely economic effect and the other is the psychological effect," Alvik explained. He elaborated that consumers are increasingly reluctant to depend on a commodity that can become scarce, citing the current "cat-and-mouse game" of supply disruptions.

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People do not want to be dependent on a commodity that can put you in that kind of cat-and-mouse game, that you suddenly can't get hold of anymore.

While major Norwegian energy companies like Equinor, Aker BP, and Vår Energi are collaborating on new exploration efforts to counter declining production, Alvik stressed the difference between oil and gas markets. Norway's natural gas, delivered via pipeline to Europe, benefits from its status as a preferred and secure supplier with a favorable climate accounting compared to liquefied natural gas. However, for oil, these unique advantages are less pronounced in the global marketplace, making it more vulnerable to price fluctuations and shifting demand patterns.

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On oil, the picture is different, Alvik believes. Oil competes in a world market. There are no special advantages for Norway as a partner country with Europe.