War boosts Norwegian oil and gas profits. Now urgently requested to help

STAVANGER, Norway (AP) — Europe’s frantic search for alternatives to Russian energy has dramatically increased the demand – and price – for Norwegian oil and gas.

As the money pours in, Europe’s second-largest natural gas supplier fends off accusations it is profiting from the war in Ukraine.

Polish Prime Minister Mateusz Morawiecki, who is looking to the Scandinavian country to replace some of the gas Poland used to get from Russia, said Norway’s “huge” oil and gas profits are “indirectly falling prey to war” . He urged Norway to use that windfall to support the worst-hit countries, mainly Ukraine.

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

Taxes on the windfall profits of oil and gas companies are common in Europe to help people deal with rising energy bills, now exacerbated by the war. Spain and Italy both approved them, while the United Kingdom government plans to introduce one. Morawiecki asks Norway to move forward by sending oil and profits to other countries.

Norway, one of Europe’s richest countries, spent 1.09% of its national income on overseas development — one of the highest rates in the world — including more than $200 million in aid to Ukraine. With the oil and gas coffers bulging, some would like to see even more money earmarked to mitigate the effects of the war—and not be deprived of funding for agencies that support people elsewhere.

“Norway has implemented drastic cuts in most UN institutions and support for human rights projects to finance the costs of hosting Ukrainian refugees,” said Berit Lindeman, policy director of the human rights group of the Norwegian Helsinki Committee.

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

“It looks really ugly when we know that incomes have skyrocketed this year,” Lindeman said.

Oil and gas prices were already high during an energy crisis and have risen because of the war. Natural gas is being traded three to four times faster than around the same time last year. The international benchmark Brent crude rocketed through $100 a barrel after the invasion three months ago and has rarely gone into hiding since.

Norwegian energy giant Equinor, majority-owned by the state, earned four times more in the first quarter than in the same period last year.

The bounty prompted the government to revise its forecast of revenues from petroleum activities to Norwegian kroner 933 billion ($97 billion) this year — more than three times what it earned in 2021. The vast majority will be funneled into Norway’s massive state investment fund — the world’s largest — to support the nation when the oil dries up. The government is not considering diverting it elsewhere.

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

He said the country has sent financial aid, weapons and more than 2 billion kroner in humanitarian aid “independent of oil and gas prices”.

European countries, meanwhile, have helped drive Norwegian energy prices up by doing their best to diversify their offerings outside of Russia. They have been accused of helping fund the war by continuing to pay for Russian fossil fuels.

That energy reliance “gives Russia a tool to intimidate and use against us, and it has now been clearly demonstrated,” NATO Secretary General Jens Stoltenberg, a former prime minister of Norway, told the World Economic Forum meeting in Davos, Switzerland. †

Russia has withdrawn natural gas to Finland, Poland and Bulgaria for refusing to demand payment in rubles.

The European Union of 27 countries aims to reduce dependence on Russian natural gas by two-thirds by the end of the year through conservation, sustainable development and alternative supplies.

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

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

Still, Oslo has heeded European calls for more gas to be licensed by operators to produce more this year. Tax incentives mean the 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 difficult times. It was a tight market last fall and is now even more urgent,” said Ola Morten Aanestad, an Equinor spokesperson.

The situation is a long way from June 2020, when prices collapsed in the wake of the COVID-19 pandemic and Norway’s previous government issued tax breaks for oil companies to encourage investment and protect jobs.

Coupled with high energy prices, incentives running out at the end of the year have prompted companies in Norway to release a slew of development plans for new oil and gas projects.

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

By then, Norway will likely face the more familiar criticism: that it contributes to climate change.

AP reporter Monika Scislowska in Warsaw, Poland, contributed.

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