FEBRUARY 22, 2023

Greetings from the Tuscan countryside, where I’m taking a breather after co-moderating the Oslo Energy Forum last week.

My latest column delves into what I learned while in Norway—and what it can teach us about our collective conflict with fossil fuels and climate change.

We also have exciting team news to share. We have brought on a new DC-based correspondent: Amena Saiyid. She has some 20 years of experience reporting on energy and the environment, including at S&P Global and Bloomberg.

We are thrilled to have her on the team. Please say hi and send her tips: amena.saiyid@ciphernews.com.

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In Norway, global tension over fossil fuels and climate change
BY: AMY HARDER

Oslo, Norway — This Nordic country is grappling with an inner conflict, accentuated by Russia’s war in Ukraine, that pits its oil and gas wealth against its climate change ambitions.

The struggle in Norway, one of the world’s wealthiest nations thanks to its plentiful supplies of oil and natural gas, is an acute illustration of the world’s omnipresent battle with itself: Our dependence on fossil fuels is ingrained into every aspect of the modern world, yet increasingly so is climate change, precisely because of those same fuels.

Norway is, on the one hand, saving Europe with its natural gas resources after Russia, historically the bloc’s largest supplier, abruptly turned off the tap. On the other, Norway is aiming to increase its oil and gas resources at a time scientists say the world must begin winding down all fossil fuel use and production.

“If Norway were to say, ‘well Europe is in a dire situation on gas, but we have decided, as our contribution to climate change mitigation, to cut down,’ that means more coal in Europe. So, that's not the way to do it,” said Jonas Gahr Støre, the Norwegian prime minister, last week at the Oslo Energy Forum.

The Forum, a high-level gathering of about 200 people now in its 50th year and backed by Norwegian energy firms, has previously included mostly oil and natural gas executives. It was opened to the media for the first time this year and sought to foster a broader debate on the energy transition.

Due in part to Norway’s central role helping Europe weather its energy crisis, the forum drew big global names, including Amina Mohammed, second in command at the United Nations, and Bill Gates, founder of Breakthrough Energy and co-founder of the Bill and Melinda Gates Foundation. The event also included virtual messages from John Kerry, President Biden’s special envoy on climate change, and Simon Stiell, executive secretary of the U.N. Convention on Climate Change, which oversees the annual negotiations on the topic.

I visited Norway to help co-moderate the conference, so I had a front row seat to the country’s inner conflict. I accepted the invitation largely because of what the event reveals about our world’s broader climate debate.

The forum’s dialogue offered a glimpse into what is sure to be an intense U.N. climate conference, known as COP28, late this year hosted by the United Arab Emirates, another oil-producing nation that’s also a member of OPEC, the mostly Middle Eastern oil cartel.

“We will go to COP28 to perhaps have one of the most difficult discussions where fossil fuels will be upfront on the agenda,” Mohammed said at the forum. “How can we ensure that is a more robust and constructive discussion and not one that brings us into a head-on collision?”

I first visited Norway in 2018 to tour the government’s planned facilities to capture and store carbon dioxide emissions (CCS). Arguably more than any other nation, Norway has made CCS central to its climate plans. That’s because it’s one of the few technologies that can, if executed as envisioned, allow a society to tackle climate change while continuing activities that emit greenhouse gases.

Norway’s flagship project, called Longship, includes a carbon storage facility under the ocean floor off Norway’s coast and carbon capture equipment installed on a cement plant and waste incinerator in Oslo. Construction on the CCS equipment is underway at both plants with completion slated for 2024 and 2025, respectively.

The project costs the equivalent of $2.6 billion, with the government footing about two-thirds of that bill, according to Tove Dahl Mustad, director of benefits realization and market developments at Gassnova, the government-owned carbon capture company leading the project.

“Norwegian authorities and Norwegian industry have never before invested a larger sum in a single climate project,” Mustad said.

Norway also taxes its oil industry at a staggering 78%, imposed a national carbon tax decades ago and doesn’t allow flaring of methane, a potent greenhouse gas and the primary component of natural gas.

Its majority state-owned oil and gas company, Equinor, is forging ahead on offshore wind and clean hydrogen, two technologies whose competencies transfer well from petroleum expertise.

“Norway is such a Rorschach test for what you prioritize in the oil and gas industry,” said Andrew Logan, an oil and gas expert at the U.S.-based nonprofit group Ceres, which works with investors to be more sustainable. “It’s a clean operator, it has a carbon tax and is good on methane.”

But:

"On the other hand, they’re exploring in the Arctic. No one else is doing Arctic exploration except Russia,” Logan said. “They’re expanding the frontier of oil and gas production in a way that does seem short-sighted.”

The government approved 22 oil and gas drilling projects off the Norwegian Continental Shelf last year, most near the year's end, according to Rystad Energy, a Norway-based energy consulting and research firm.

Within five years, Norway is on track to go from supplying 24% to more than 30% of all European gas, concluded Rystad Energy, a shocking increase for an industry that usually changes at a glacially slow pace.

Source: Rystad Energy data provided to Cipher • This analysis covers Europe's import mix and includes the European Union and the United Kingdom. Other includes seven countries, largely Qatar and Nigeria.

Logan said Norway should at least have a plan to eventually wind down its oil and gas industry decades from now, like what California, another climate-leading and oil-producing region, has done. Støre rejected that notion, in response to my question on the matter.

“Fixing a date or deliberating doing that is the wrong approach,” Støre said at the forum. But Norway's biggest customers are adamant they’re not in a long-term relationship with oil and gas.

“Today, we are very, very grateful that Norway has become the biggest provider of natural gas,” said Christian Maaß, who leads the German Federal Ministry for Economic Affairs and Climate Action, in a virtual interview at the forum in Oslo. “And also, we’ve talked about the mid-term and the longer term. It’s crystal clear that Germany is moving away from fossil fuels.”

Norway is betting that in a future with vastly less oil and gas, it will be among the world’s last producers (I call that a crude game of musical chairs). Its petroleum-funded sovereign wealth fund, worth more than $1 trillion, gives it a better shot than most other oil-producing nations.

Støre said his country has a goal of reducing emissions from its oil and gas industry 50% by 2030 and acknowledged the industry will gradually decline (but not go away altogether) in the longer term.

“We have to be trustworthy in the sense that we can get the emissions down,” Støre said, “that the transition is real.”

Editor’s note: Breakthrough Energy, which Bill Gates founded, supports Cipher.

New Toyota Chief Says He Will Accelerate Shift in EV Strategy — The Wall Street Journal
Amy’s take: But what about Subaru (which Toyota owns)? Can you finally get Subaru to go at least hybrid?!

Cost of EDF's new UK nuclear project soars to $40 billion — Reuters
Anca’s take: Wow—to the price tag and to the fact that this project is a decade overdue, highlighting the challenges of building new nuclear plants.

Gentrification by fire — The Washington Post
Amena’s take: This article provides an eye-opening analysis of how unaffordable housing and related insurance has become in California after climate-fueled wildfires.

The world won’t decarbonize fast enough unless renewables make real money — The Economist
Amy’s take: Right now, renewables are losing real money. This is a foundational problem.

Japan’s solar PV industry is set for fresh growth — Energy Monitor
Anca’s take: Here’s an example of how powerful visuals can be—check out the chart that shows the exponential growth of solar PV in Japan after 2011.

Smaller, safer, cheaper? Modular nuclear plants could reshape coal country — The Washington Post
Amena’s take: I wonder what it would take to retrain workers to work on small modular reactors and whether the reactors can truly replace lost coal mining jobs.

Inside BP’s Decision to Dial Back Its Green Transition — The Wall Street Journal and What, Exxon’s Not Going to be an Algae Company? — Substack
Amy’s take: Love or hate Bill McKibben, he makes a good point about how wind and solar don’t generate continually new profits the way oil and natural gas (and future hydrogen and the once-promised algae) would have.

Mexico's Lopez Obrador orders ministry to step up lithium nationalization — Reuters
Anca’s take: A great example of how the race for critical raw materials is heating up—expect so-called “resource nationalism” to gain ground as the energy transition accelerates.

Weekly data: Are whales really killed by offshore wind farms? — Energy Monitor
Amy’s take: The best story I’ve seen yet digging deep into this issue, but the headline needs to work (maybe: How offshore wind fits into increased whale deaths).

World Bank may loosen loan ratio to free up $4 billion a year — Reuters
Anca’s take: This small step is part of wider reforms needed to help developing countries cope with climate change. We wrote more about this topic in a past edition.

More of what we're reading:

• EU carbon hits 100 euros taking cost of polluting to record high — Reuters

• Germany Wants Tax Credits for Green Energy to Counter US IRA — Bloomberg

• Pakistan plans to quadruple domestic coal-fired power, move away from gas — Reuters
• Carbon border rules protectionist and discriminatory: India to WTO — The Economic Times
• Researchers develop ‘green’ method to extract hydrogen from seawater — United Press International
• FERC OKs cold weather reliability standards for US generators but orders NERC to address shortcomings — Utility Dive
• Georgia nuclear plant again delayed at cost of $200M more — AP News

Nordic carbon capture

This photo, courtesy of Heidelberg Materials, shows the installation of carbon capture equipment at a cement plant outside Oslo, Norway. Construction should wrap up in late 2024, although the war in Ukraine delayed this timeline by a few months, according to Aker Carbon Capture, a company involved in the project. The equipment should capture 50% of the plant’s carbon emissions using excess heat from cement production, said Gassnova, the state-owned CCS company working on the project. For a local perspective, check out this Norwegian publication.

Each week, we feature a photo that is somehow related to energy, the thing we all need but don’t notice until it’s expensive or gone. Email your ideas and photos to news@ciphernews.com.

Editor’s note: In addition to supporting Cipher, Breakthrough Energy also supports and partners with a range of entities working to tackle climate change, including nonprofits, corporations, startups and research firms. For more information on Cipher’s editorial policy, click here.