Norway Energy Profile: Europe’s Largest Petroleum Liquids Producer – Analysis
Norway is the largest holder of crude oil and natural gas reserves in Europe, and it provides much of the petroleum liquids and natural gas consumed on the continent. Norway was the third-largest exporter of natural gas in the world after Russia and Qatar in 2013.
In 2014, the petroleum and natural gas sector accounted for 45% of Norway’s export revenues and more than 20% of the country’s gross domestic product (GDP).1 Norway’s petroleum and other liquids production peaked in 2001 at 3.4 million barrels per day (b/d) and declined to 1.8 million b/d in 2013 before growing to 1.9 million b/d in 2014. Natural gas production, on the other hand, increased nearly every year since 1993, except for a small decline in year-over-year production in 2011 and 2013. Natural gas production in 2014 was roughly the same as in 2013.
Hydropower is the principal source of Norway’s electricity supply, accounting for 96% of total net generation. In June 2012, government officials from Norway, Germany, and the United Kingdom confirmed their plans for subsea electric power connections between their countries to strengthen the northern European electricity grid and to increase supply security. The Norwegian state-owned energy system operator, Statnett, will work with the United Kingdom’s National Grid to construct the Norway-United Kingdom cable connection, expected to be completed in 2021. Statnett will also cooperate with Germany to build the Norway-Germany cable, expected to be completed in 2019.2
The historic agreement between Norway and Russia, which defined their maritime boundaries in the Barents Sea and the Arctic Sea and resolved their 40-year old dispute, was fully ratified by both governments in early 2011, and went into effect in July 2011. As a result of the agreement, Norway gained about 34,000 square miles of continental shelf. The agreement requires the two countries to jointly develop oil and natural gas deposits that cross over their boundary.
Petroleum and other liquids
Norway is the largest oil producer and exporter in Western Europe.
According to the Oil & Gas Journal, Norway had 5.497 billion barrels of proved crude oil reserves as of January 1, 2015, the largest oil reserves in Western Europe.3 All of Norway’s oil reserves are located offshore on the Norwegian continental shelf (NCS), which is divided into three sections: the North Sea, the Norwegian Sea, and the Barents Sea. The bulk of Norway’s oil production occurs in the North Sea. New exploration and production activity is taking place further north in the Norwegian Sea and Barents Sea, where small volumes of liquids and natural gas are currently being produced.
Norway’s Ministry of Petroleum and Energy (MPE) is responsible for overseeing the country’s energy resources. The Norwegian Petroleum Directorate (NPD) reports to the MPE as an advisor, administers exploration and production activities on the NCS, and collects and analyzes data. State-owned Petoro manages the commercial aspects of the government’s financial interests in petroleum operations and associated activities. Petoro acts as the licensee for production licenses and companies.
The largest energy company operating in Norway is Statoil ASA, controlling 70% of Norway’s oil and natural gas production. Statoil ASA was created by the merger of Statoil and Norsk Hydro in October 2007. Norway’s government is the largest shareholder of Statoil, owning 67% of the international energy company.4 In addition to its operations in Norway, Statoil is a major international company, and it has interests in more than 30 countries.
Several international oil companies have a sizable presence in Norway. The Norwegian government’s subsidy of oil and natural gas exploration, introduced in 2005, refunds 78% of the exploration costs to the companies. In addition, taxes from onshore oil activities and from liquefied natural gas (LNG) shipped overseas were reduced, which has attracted additional international investment.
Exploration and production
In 2014, Norway produced 1.9 million barrels per day (b/d) of petroleum and other liquids (Figure 1), 3% higher than in 2013.5 Norway’s petroleum production has been gradually declining since 2001 as oil fields have matured, although production in 2014 was 3% higher than in 2013. The NPD expects that over the next several years, petroleum production will continue to decline slowly.6 The three largest producing crude and condensate fields in 2014 were Troll (126,000 b/d), Ekofisk (117,000 b/d), and Snorre (97,000 b/d).7 The Troll and Ekofisk fields are located in the Norwegian portion of the North Sea, where most of Norway’s current production occurs. Snorre field is located a little further north, in the southern Norwegian Sea.
Overall investment in the oil and natural gas industry is declining in response to lower oil prices. Additionally, investment is being diverted toward shutdown and removal of equipment at old fields and away from finding and developing new fields. Total investments in oil and natural gas extraction and pipeline transport in 2014 were 214 billion Norwegian kroner ($33 billion), 2 billion kroner higher than in 2013. However, in U.S. dollar terms, investments in 2014 were about 6% lower than in 2013. As of August 2015, total investments in 2015 compared with 2014 are estimated to be 10% lower in Norwegian krone terms. Spending on exploration and field development in the first half of 2015 was 18% lower than in the first half of 2014, while spending on shutdown and removal was more than 70% higher.8
North SeaNorway has been producing oil from the North Sea since 1971, and the North Sea still accounts for the bulk of Norway’s production. Although most of the Norway’s North Sea fields are in decline, there have still been several significant discoveries in the North Sea in recent years. The Norwegian Parliament approved joint development and operating plans in June 2012 for Lundin’s Edvard Grieg oil and natural gas field and Det Norske’s Ivar Aasen Field (formerly called Draupne). Estimated to hold 186 million barrels of oil equivalent, Edvard Grieg is scheduled to come onstream in the fourth quarter of 2015 and produce 90,000 b/d of oil at its peak production. The nearby Ivar Aasen field, estimated to have 188 million barrels of recoverable oil, will be tied into Edvard Grieg and begin producing oil in the fourth quarter of 2016.9
The Johan Sverdrup oil field was the largest oil discovery in the world in 2011, with reserves estimated at between 1.8 and 2.9 billion barrels of recoverable oil. This field is located 96 miles west of Stavanger in the North Sea. Johan Sverdrup was initially believed to consist of two fields four miles apart: Avaldnes, discovered by Lundin in 2010, and Aldous, discovered by Statoil in 2011. Further exploration activities revealed they constitute one giant field, renamed Johan Sverdrup in 2012, when a cooperation agreement was signed between the field partners naming Statoil the operator. Partners also include Petoro, Det Norske, and Maersk. The field is expected to be a new stand-alone processing and transport hub, with production scheduled to start in late 2019, eventually reaching a peak of 550,000 b/d – 650,000 b/d, accounting for 25% of the forecasted production from the Norwegian continental shelf.10
Barents SeaGoliat is the first oil field to be developed in the Barents Sea. Discovered in 2000, Goliat’s proved oil reserves are estimated at 174 million barrels. Eni owns 65% of the field and is the operator, while Statoil owns the remaining 35%. The field is being developed with a cylindrical floating production, storage, and offloading (FPSO) platform. The FPSO was built in South Korea, shipped to Hammerfest, Norway, and in May 2015, towed to its destination at the Goliat field, offshore Norway. Production at Goliat is scheduled to begin before the end of 2015. The field is expected to produce 93,000 b/d of oil in its second year of production and decline rapidly thereafter. Goliat has estimated natural gas reserves of 282 billion cubic feet (Bcf). Produced natural gas will be reinjected into the formation to improve oil recovery.11
Johan Castberg is another recent discovery in Norway’s Barents Sea. The Johan Castberg field encompasses three finds made in 2011, 2012, and 2014. Johan Castberg holds an estimated 500 million barrels of oil. Statoil is the operator for the field and was due to decide on a development plan for the field in 2015.12 However, mostly because of its remote Arctic location, development of this field will be relatively expensive. In March 2015, Statoil announced that it was pushing back its concept selection decision to the second half of 2016, with an investment decision expected in 2017.13
According to Statistics Norway, Norway exported an estimated 1.28 million b/d of crude oil and condensate in 2014, of which 98% went to European countries (Figure 2).14 The top five importers of Norwegian crude and condensate in 2014 were the United Kingdom (41%), the Netherlands (27%), Germany (12%), Sweden (5%), and Denmark (3%).
Norway has an extensive network of subsea oil pipelines, including eight major domestic oil pipelines with a capacity to transport about 170,000 b/d of crude and condensate to processing terminals on Norway’s coast.15 There are many smaller pipelines that connect North Sea fields to one of the major pipelines. Remaining offshore oil production is brought ashore via shuttle tanker.
International oil pipelineConocoPhillips operates the 830,000 b/d capacity subsea Norpipe, which connects Norwegian oil fields in the Ekofisk system (as well as associated fields in both Norwegian and United Kingdom waters) to the oil terminal and refinery complex at Teesside, England.16
Brent benchmark crude
A benchmark crude is a specific crude oil that is widely and actively bought and sold, and to which other types of crude oil can be compared to determine a price by an agreed-upon differential. Brent, the most widely used global crude oil benchmark, is composed of four crude blends: Brent, Forties, Ekofisk, and Oseberg (BFOE). The Brent and Forties blends are produced offshore in the waters of the United Kingdom, and the Ekofisk and Oseberg blends are mainly produced offshore in the waters of Norway.
North Sea Brent crude oil loadings average slightly less than 1 million b/d, with the two Norwegian crude streams accounting for about 40% of the total.
The Brent benchmark was originally based on the output of the Brent field, a single field in the United Kingdom’s sector of the North Sea. However, as production from the Brent field declined, other fields and blends were added. Today the Brent benchmark encompasses the four BFOE crude blends, most of which are also now in decline. Production and loading of Ekofisk and Oseberg blend crudes have been generally declining in recent years, although production at Ekofisk did grow in 2014. Even though the benchmark itself accounts for only a small portion of total world crude production, it remains a key indicator for world crude oil pricing.
As of the end of 2014, Norway had 346,000 b/d of crude oil refining capacity The country has two major refining facilities: the 120,000 b/d refinery at Slagentangen, operated by ExxonMobil;17 and the 226,000 b/d Mongstad plant, operated by Statoil.18 Most of the output from both refineries is exported, and Norway is an important supplier of gasoline and diesel fuel to the European Union (EU). Statoil dominates the retail products market in Norway, and the company has also expanded into other European markets. The Port of Mongstad is the largest port in Norway measured by tonnage.
Norway is the world’s third-largest exporter of natural gas after Russia and Qatar, and the seventh-largest producer of dry natural gas as of 2013
According to the Oil & Gas Journal, Norway had 72 trillion cubic feet (Tcf) of proved natural gas reserves as of January 1, 2015.19 Despite maturing major natural gas fields in the North Sea, Norway has been able to sustain increases nearly every year in total natural gas production since 1993 by continuing to develop new fields.
As is the case with the oil sector, Statoil dominates natural gas production in Norway. A number of international oil and natural gas companies, including ExxonMobil, ConocoPhillips, Total, Shell, and Eni, have a sizable presence in the natural gas and oil sectors in partnership with Statoil.
State-owned Gassco is the operator for Norway’s natural gas pipeline network, including the network of international pipelines and receiving terminals that exports Norway’s natural gas production to the United Kingdom and continental Europe. The pipelines are owned by Gassled, a joint venture, in which the Norwegian government has a 46% direct interest, and Statoil owns 5%. The remaining 49% is owned by two Canadian pension funds, other institutional investors, and private companies.
The Canadian pension funds invested in Gassled in 2011 expecting moderate but predictable returns, which are typical for established pipeline companies. However, in 2013, the Norwegian government announced that it would cut the tariff rate for natural gas pipelines by 90% as of January 1, 2016. The Canadian pension funds and some other investors filed a lawsuit claiming that the tariff reduction was illegal and financially damaging. In September 2015, the courts ruled in favor of the Norwegian government and the tariff change. Norway is generally a low-risk country for investors, where these types of disputes are rare.
Production and development
Norway produced slightly more than 3.8 Tcf of dry natural gas in 2014, roughly the same as in 2013 (Figure 3). Norway’s largest producing natural gas field is Troll, which produced 1.0 Tcf in 2014, representing about 27% of Norway’s total natural gas production that year. The three other largest-producing fields in 2014 were Ormen Lange (0.7 Tcf), Åsgard (0.3 Tcf), and Kvitebjørn (0.2 Tcf). These four fields accounted for slightly more than 60% of Norway’s total dry natural gas production in 2014.20
Two new natural gas and liquids fields are scheduled to start producing by the end of 2016 and by the end of 2017. The first to come online, the Martin Linge field in the North Sea, holds an estimated 0.7 Tcf of recoverable natural gas and about 66 million barrels of liquids. The Aasta Hansteen field is located in the Norwegian Sea, north of the Arctic Circle. This field is more than 180 miles from land. The development plan for the field includes building a nearly 300 mile undersea pipeline to take natural gas from the field to the Nyhamna natural gas processing plant. Aasta Hansteen holds an estimated 1.6 Tcf of recoverable natural gas as well as a small volume of liquids. Statoil, the main shareholder and operator of Aasta Hansteen, has also made several smaller discoveries in nearby fields that could be developed in the future.
Norway exported about 95% of its natural gas production in 2014. Most of Norway’s natural gas exports were transported to European Union (EU) countries via Norway’s extensive export pipeline infrastructure, 0.1 Tcf was exported to EU countries as LNG, and the remaining 0.1 Tcf went to other parts of the world as LNG.21
International gas pipelinesNorway operates several important natural gas pipelines (Table 1)22 that connect directly with other European countries, including France, the United Kingdom, Belgium, and Germany. These pipelines are operated by Gassco. Some pipelines run directly from Norway’s major North Sea fields to processing facilities in the receiving country. Other pipelines connect Norway’s onshore processing facilities to European markets (Figure 4).
|Facility||Status||Capacity (trillion cubic feet per year)||Total length (miles)||Origin||Destination||Details|
|Norpipe||operating||0.6||280||Ekofisk area||Emden, Germany||started operation in 1977|
|Zeepipe I||operating||0.5||500||Sleipner platform||Zeebrugge, Belgium||started operation in 1993|
|Europipe I||operating||0.6||390||Draupner platform||Dornum, Germany||started operation in 1995|
|Zeepipe IIA and IIB||operating||1.8||190||Kollsnes gas plant||Sleipner platform (IIA) and Draupner platform (IIB)||started operations in 1996 (IIA) and 1997 (IIB)|
|Franpipe||operating||0.7||520||Draupner platform||Dunkirk, France||started operation in 1998|
|Europipe II||operating||0.8||410||Kårstø gas plant||Dornum, Germany||started operation in 1999|
|Vesterled||operating||0.5||220||Heimdal field||St. Fergus, Scotland||started operation in 2001|
|Langeled||operating||0.9||720||Nyhamna gas plant||Easington, England||started operation in 2007. Connects to the Sleipner platform.|
|Tampen and Gjøa||operating||0.6||14 Tampen and 80 Gjøa||Statfjord and Gjøa fields||connects to the FLAGS pipeline to St. Fergus, Scotland||started operations in 2007 (Tampen) and 2010 (Gjøa)|
|Source: U.S. Energy Information Administration based on Statoil and Gassco.|
Liquefied natural gas (LNG)
Shipments of Norwegian liquefied natural gas (LNG) totaled approximately 184 Bcf in 2014, up from 122 Bcf in 2013 and 166 Bcf in 2012. European countries received about 60% of Norway’s LNG exports in 2014, most of which were exported to Spain (Figure 5).23
Norway’s first large-scale LNG liquefaction facility opened in 2007. Statoil operates the LNG export terminal and liquefaction facility at Melkoya, Norway, near Hammerfest. The facility draws gas from the Snohvit natural gas field, Norway’s first natural gas development in the Barents Sea. The Melkoya facility, the first large-scale LNG export terminal in Europe, has a design capacity of 4.2 million metric tons per year (mt/y) of LNG.
Norway has several small-scale LNG facilities, including three small-scale liquefaction plants with a combined capacity to produce 0.44 mt/y of LNG. Norway has been at the forefront of a growing small-scale LNG industry in the Nordic countries. LNG is distributed by small tanker ships and by tanker trucks to ports and inland facilities in Norway, Sweden, and Denmark. Finland’s first small-scale LNG receiving terminal is under construction and scheduled to come online in 2016. LNG is mainly used by industrial consumers, and it is increasingly being used as marine fuel.
Hydrocarbon gas liquids
Hydrocarbon gas liquids refers to both natural gas liquids (such as ethane, propane, and butanes) and olefins produced by natural gas processing plants, fractionators, crude oil refineries, and condensate splitters. Norway’s growing natural gas production has resulted in increasing yields of natural gas plant liquids (NGPL), making Norway Europe’s leading producer of NGPL. As natural gas production has grown in Norway, the quantities of recovered NGPL has increased significantly, from 124,000 b/d of oil equivalent in 2000 to 327,000 b/d of oil equivalent in 2014.24 Most NGPL are produced at the Kårstø processing plant, north of Stavanger, Norway, which can process about 3.1 Bcf per day of wet natural gas and unprocessed condensate that it receives from a number of fields on the Norwegian continental shelf, including Åsgard, Sleipner, and Mikkel.25
The significant NGPL output of the natural gas processing and fractionation capacity in Norway, particularly at Kårstø, has resulted in the port of Kårstø becoming the third-largest LPG export facility in the world. Propane and butane originating at the port move by tanker to destinations around the world.26 However, while Norway’s exports of liquefied petroleum gas (LPG, a mixture of propane and butane) continue to rise, output of ethane has been gradually declining.
Historically, ethane produced at Kårstø was shipped by barge to petrochemical crackers at Rafnes, Norway and Stenungsund, Sweden. The diminishing ethane output, however, is no longer sufficient for Ineos at Rafnes and Borealis at Stenungsund to operate their plants at full capacity. Seeking new supplies of ethane, in 2012 Ineos entered into a long-term supply agreement with Range Resources to import ethane from the U.S. Northeast. Ethane recovered alongside natural gas production in western Pennsylvania will be piped to the Marcus Hook terminal outside Philadelphia, Pennsylvania. From there dedicated ethane carriers will transport the ethane to the Rafnes cracker.27 Once fully implemented in the fourth quarter of 2015, the arrangement will result in the first large-scale intercontinental movement of ethane in history. The arrangement will also result in Norway, a traditional energy exporter and historically a significant source of U.S. LPG imports, becoming a net importer of ethane from the United States.
Hydropower accounts for 96% of the electricity produced in Norway.
Electricity generation in Norway in 2013 was 134 billion kilowatthours (BkWh), of which 129 BkWh came from hydropower. According to Statistics Norway, total net consumption of electricity in 2013 was 120 BkWh, less than 1% higher than in 2012.28
About 96% of all electricity generation in Norway comes from hydropower. The remaining electricity is generated from fossil fuels and other renewables including wind and biomass. The largest renewable energy power generator in Europe is Statkraft, which is owned by the Norwegian state and is a major supplier of hydropower. Norway’s electric grid is owned and operated by Statnett. Statnett is responsible for ensuring the reliability and efficiency of the electric grid and for balancing electricity supply and demand. The company is owned by the Norwegian state, and its revenues from operating the grid are regulated by the Norwegian Water Resources and Energy Directorate under the Ministry of Petroleum and Energy.
In the late 1990s, Norway, Sweden, Finland, and Denmark integrated their electricity markets into a single market for the Nordic region. In 2008, a 0.7 gigawatt capacity subsea power cable allowing trade between Norway and the Netherlands began operating. In addition, subsea power cables to connect Norway to the United Kingdom and to Germany are currently under construction. They are expected to be completed by 2019 and 2021, respectively, both with transmission capacities of 1.4 gigawatts.29 Norway also has a small interconnection with Russia in the far north. In 2013, Norway imported 10 BkWh of electricity and exported 15 BkWh. More than half of the imports and exports went to or came from Sweden. Trade with the Netherlands and Denmark accounted for most of the remaining imported and exported electricity, with only small amounts traded with Finland and Russia.
- Data presented in the text are the most recent available as of September 30, 2015.
- Data are EIA estimates unless otherwise noted.
2Statnett, Cable to the UK and NORD.LINK, accessed May 27, 2015
3Oil & Gas Journal, “Worldwide Look at Reserves and Production,” (December 1, 2014) p. 32.
4Norwegian Petroleum Directorate, Facts 2014, (May 5, 2014), p. 29.
5Norwegian Petroleum Directorate, Fact Pages, Monthly Production – by field, accessed August 18, 2015.
6Norwegian Petroleum Directorate, The shelf in 2014 – Petroleum production, (January 15, 2015).
7Norwegian Petroleum Directorate, Fact Pages, Monthly Production – by field, accessed August 18, 2015.
8Statistics Norway, Investments in oil and gas, manufacturing, mining and electricity supply, Q3 2015, accessed August 25, 2015.
9Lundin Petroleum, Operations–Norway, accessed August 31, 2015.
10Statoil, Johan Sverdrup, accessed August 31, 2015 and Lundin Petroleum, Operations–Johan Sverdrup, accessed August 31, 2015.
11Eni Norge, Goliat Facts, accessed August 19, 2015.
12Norwegian Petroleum Directorate, Fact Pages, Johan Castberg, accessed August 31, 2015.
13Statoil, “New timeline for Johan Castberg and Snorre 2040,” (March 6, 2015).
14Statistics Norway, External trade in goods, accessed August 24, 2015.
15Norwegian Petroleum Directorate, Facts 2014, (May 5, 2014), p. 75.
16ConocoPhillips, Norway, The Pipelines, accessed August 27, 2015.
17ExxonMobil, Norway, Refining and supply, accessed August 26, 2015.
18Statoil, Annual Report 2014, p. 43.
19Oil & Gas Journal, “Worldwide Look at Reserves and Production,” (December 1, 2014) p. 32.
20Norwegian Petroleum Directorate, Fact Pages, Monthly Production – by field, accessed August 18, 2015.
21Statistics Norway, External trade in goods, accessed August 24, 2015.
22Statoil, Norway’s Gas Transport System, accessed August 13, 2015 and Gassco, Pipelines and Platforms, accessed August 13, 2015.
23Statistics Norway, External trade in goods, accessed August 24, 2015.
24Norwegian Petroleum Directorate, Production page, Yearly Production on the Norwegian Continental Shelf, 1971-2014, accessed September 18, 2015.
25Statoil, Kårstø Processing Plant, accessed September 18, 2015.
27Ineos, “INEOS Europe AG announces a new agreement to source Ethane from the USA for import into Europe via the Sunoco Logistics, L.P. operated Mariner East project,” (September 26, 2012).
28Statistics Norway, Electricity, annual figures, 2013, Table 3: Generation, imports, exports and consumption of electricity (March 25, 2015).
29Statnett, Brief History, Cable to the UK, and NORD.LINK, accessed May 27, 2015.