Norwegian oil- and gas production

This report discusses the impact of changes in Norwegian oil- and gas production on global CO ₂ emissions and the energy situation in low-income countries. The discussion is based on an analysis carried out by Statistics Norway (Fæhn et al., 2013), published reports, among others from IEA, and assessments of the properties of the international energy markets and the energy situation in low-income countries. In this report, it is argued that changes in Norwegian gas production primarily affect the European gas market, while changes in Norwegian oil production have global impacts.

As Norwegian oil production only constitutes around two per cent of global oil production, even a significant decline in Norwegian pro¬duction causes only modest impact on global fuel prices: We estimate that a fifty percent cut in Norwegian oil production will only cause the international fuel prices to increase by around one percent in the long run. Therefore, reduced Norwegian oil production has minor impact on low-income countries’ energy situation.

Global emissions and poor countries’ energy situation will primarily depend on the development of global climate policies. A global climate policy compatible with the two-degree target will have a significant impact on low-income countries’ energy situation. The challenge for these countries is to increase their use of low or zero carbon energy sources, which again depends on their national policies and technological development.

If the international community does not manage to agree on an ambitious global climate agreement, reduced oil production in Norway can contribute to global emissions reduction, but compared with total global emissions, the contribution can only be modest. Our calculations indicate that for every percentage reduction in Norwegian oil production, global CO ₂ -emissions are reduced by approximately one million ton (corresponding to, for example, two per cent of Norway’s annual emissions). Although reduced oil production leads to global emissions reduction, a cut in production is not necessary a cost effective climate policy. Reduced production implies less revenue, and has to be compared with the impacts and costs of alternative climate policies. The climate impact of reduced gas production is uncertain.