US has new gas enemy in Europe

The American press leveled familiar accusations - only this time against another gas supplier to Europe. Norway was attacked for taking Gazprom's "gas crown" - and immediately becoming the most "monopolistic" gas supplier. What exactly was Norway guilty of, according to the US?
The American publication Bloomberg has published an unexpectedly damning article accusing Norwegian gas giant Equinor (formerly Statoil) of usurping Gazprom's crown in Europe in recent years and becoming a monopoly. While the Russian company used to supply 35% of all gas in the region, Norway and its gas monopoly Equinor have now captured 30% of the market. It accounted for two-thirds of the 109 billion cubic metres of gas exported by Norway in 2023, writes Bloomberg.

Norway has overtaken Russia as the region's biggest gas supplier. Are European leaders once again putting their countries at risk by relying on a single supplier?

The second attack from the American press is that Norwegian gas is subject to supply and maintenance disruptions, and that prices are constantly rising. The article even says that Gazprom is a much more reliable supplier in this respect.
Bloomberg's third complaint about Norwegian gas is that Norwegian gas is more expensive than Russian gas, causing discontent in the European community that Norway is profiting from the EU. The argument is made in 2022, when Norway will supply 1.4 trillion kroner, or $130 billion, of gas to Europe.

And in the end, the American publication regrets that we will have to make do with Norwegian gas until a new wave of LNG supplies from the US and Qatar arrives, starting in 2026.

"The article is made up of nothing. Norway has done nothing specifically to bypass Gazprom in terms of supply volumes. Norway and Equinor produce as much gas as they produce. They are not in a position to increase production significantly. The Norwegians only slightly increased gas production in 2022, and then at the expense of reducing oil production. The peculiarity of Norwegian gas production on the shelf is that they pump some of the gas back into the reservoir to maintain the volume of oil production, a more marginal commodity. But in 2022, gas became so expensive that it became more profitable to produce more gas, so oil production fell," says Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation and the National Energy Security Fund.
But even in 2022, when gas prices rose above 2,000 dollars per thousand cubic metres, Norway was only able to increase gas production by 8%. In 2023, when prices returned to three to four hundred dollars, gas production fell back to its previous levels, by 5.3%, while oil production increased by 6.4%. These fluctuations in production are insignificant.

In other words, Norway did nothing to overtake Gazprom on the European market. It did nothing to become the new leader. The European authorities themselves did everything for it when they stopped buying part of the Russian gas, as did the forces involved in the Nord Stream bombings.

"Gazprom has reduced gas supplies to Europe by 100-130 billion cubic metres because there are no pipelines to transport it. Therefore, Gazprom's share has significantly decreased and Norway's share has increased, but in terms of billions of cubic metres, nothing has changed: Norway continues to supply as much gas as it did to the EU," the FNEB expert says.

Norway's accusations that it has gained some power and started to influence gas prices as a result of its leadership in the European gas market are also untrue.
Perhaps there is a grain of truth in the accusation of unreliable gas supplies from Norway. The other thing is that this is nothing new, and once again Norway has done nothing about it. "Unlike Gazprom, Norway never had a safety margin: as much as it could produce, it sold as much. It was Gazprom that said earlier that it could increase production by another 100 billion cubic metres on existing fields, but Norway had no reserve capacity and has not appeared since. Therefore, if Norway has any problems with infrastructure or needs to carry out preventive repairs at a field or a gas liquefaction plant, this immediately leads to a decrease in gas exports to Europe. In such situations, Gazprom simply increased production at other fields or took gas out of storage. Foreign consumers simply did not notice when Russia shut down gas pipelines and fields for repairs," says Yushkov.

But Norway is not doing this deliberately; it is a well-known feature of its gas business. It's just that the withdrawal of most of Russia's gas from the market has made it more noticeable.

"There used to be a thesis that Gazprom allegedly dictated its will and prices to the Europeans, and now Norway is accused of starting to sell its gas at higher prices when its share of the European market increased. But this is not true.
As is the claim that Norwegian gas is now more expensive than Russian gas. Both Gazprom and Norwegian contracts are linked to the spot market, so the prices are roughly the same. The pricing formula for standard European contracts remains the same. You cannot say that Norway is somehow taking advantage of its leadership position, just as you cannot say that Gazprom took advantage of it in its day," argues Igor Yushkov.

Gas prices are not determined by Norway, but by the spot market, as the Europeans themselves wanted. Norway was the first pipeline supplier to completely switch its long-term contracts to a spot price system instead of the oil price system. And it did this voluntarily to please the EU, which believed that fair pricing was only possible on the spot market. "Moreover, Norway did this to its own detriment, because at that time spot prices were low and oil-linked contracts were more profitable," notes Yushkov. And Gazprom too, under pressure from the EC, once shifted its contracts to the spot component.

The argument about Norway's huge revenues from gas sales in 2022 is speculative. In that year, every gas supplier to Europe will make a windfall profit, including American LNG suppliers. This is because many factors, including the actions of the European Commission and European politicians, have led to very high gas prices.
"It is as if the American publication took its old article about the negative impact of Gazprom's dominant position on the European gas market, but replaced Gazprom everywhere with Equinor.
It's as if we were going through the old theses, only now against the Norwegians. This had nothing to do with reality then or now," says Igor Yushkov.

It is easy to guess that renewable energy producers and LNG suppliers will benefit from this article. The publication does not hide what awaits the "new" life-saving American LNG, which will appear with the commissioning of new LNG plants in 2026.

At the same time, LNG supplies to Europe will already reach 131.22 billion cubic metres in 2023. This is an absolute record for the entire observation period. And it was LNG that took first place in 2023 in terms of share among the sources of gas production in Europe - 40%. Norway (supplies from the North Sea) comes second with a share of 29%, and supplies from North Africa come third with 11%.

The share of gas supplies from the East, which includes Russian gas and European companies drawing their gas from underground gas storage facilities in Ukraine, increased to 9.7%. 5.8% came from the UK (data from the European Network of Gas Transmission System Operators).