How big a hypocrite is Norway on energy matters?

Good morning and welcome back to Energy Source, coming to you this week from London and Oslo.

In M&A news, consolidation in the US shale oil sector continues, this time with the announcement yesterday of Diamondback Energy’s $26bn tie-up with Autry Stephens’ Endeavour Energy Resources. That bring us to four multibillion-dollar shale deals in the past five months.

Meanwhile in Europe, I sat down last week with TotalEnergies’s long-serving chief executive Patrick Pouyanné for a wide-ranging interview. Since rising to the top of the business in 2014, Pouyanné’s strategy and messaging have been among the most consistent in the industry and he is not changing now.

Policymakers and campaigners were naive, he argued, to think it would be possible to shrink oil and gas production before sufficient renewable energy is available to take its place, given continued growth in global energy demand.

Governments were mis-selling the energy transition, he warned, if they failed to acknowledge it would lead to higher cost. “We think that fundamentally this energy transition will mean a higher price of energy,” he told me.

Read the full interview here, where Pouyanné rejected any interest in making a move for all or part of BP, said renewables companies remained overvalued and called on European leaders to negotiate a free trade deal to protect liquefied natural gas shipments from the US.

Now from the French boardroom to Oslo, where our Nordic correspondent, Richard Milne, has delved into the energy paradox that is Norway.

Thanks for reading — Tom

Is Norway an energy hypocrite?

The rich Nordic country is western Europe’s biggest petroleum producer but likes to tout its green credentials too. Its sovereign wealth fund, the world’s largest, is funded entirely by oil and gas revenues, and yet is a growing critic of the majors. Its huge renewable electricity production and strong support for electric vehicles come alongside backing for deep-sea mining, extensive drilling in the Arctic, and other environmentally-questionable practices.

“The external pressure on Norway is growing. The contradictions are becoming more obvious. It’s holding for now, but I don’t know if it can do so forever,” said one Norwegian chief executive.

Environmentalists, and plenty of capitalists too, are quick to call it a hypocrite, saying one thing and doing another. But the government in Oslo talks more about paradoxes — arguing that it is the democratic supplier of choice for oil and gas to Europe while undermining itself by providing some of the world’s most generous subsidies to convert cars, buses and ferries to fossil-free energy.

It’s worth having a look at several recent events to examine the charges.

Exhibit A: Norway’s $1.5tn oil fund sharply criticised ExxonMobil for suing two small climate shareholder groups.

Critics on both sides are quick to call out hypocrisy. An oil fund criticising oil companies?

But the fund and Oslo argue it is a financial investor set up to diversify Norway’s revenues away from petroleum. The fund itself even recommended quitting all oil and gas stocks in 2017, only to be rebuffed by the government. In that case, being an active investor pushing oil and gas companies to get serious on climate change (and lay off critics) would be rational action.

Exhibit B: Norway’s parliament last month voted to open up for deep-sea mining in and close to the Arctic.

The decision to allow exploration and potentially extraction has drawn fire from everybody from environmentalists and fishing groups to big companies and, most recently, the European parliament. The latter last week expressed its “concerns” and called for a moratorium on deep-sea mining.

Several of the world’s largest companies have pledged not to use minerals extracted from the seabed while plenty of countries have sworn it off too, leaving Norway in awkward company alongside China, Russia and India among others.

Authorities in Oslo counter deep-sea mining is likely to be needed to meet demand for minerals for the green transition without becoming too dependent on China. They add that any extraction in Norwegian waters would be subject to additional parliamentary approval and will not take place if the environmental cost is too high.

But for environmentalists, pushing ahead with such a controversial technology fatally undermines Norway’s claims to support sustainable oceans. “Norway talks a good talk, but look at its actions — they’re often the exact opposite,” said one non-Norwegian campaigner.

Exhibit C: Norway’s continued drilling for oil and gas in the Arctic as well as its increasing use of the argument that it is the main democratic petroleum supplier for Europe.

Norway undoubtedly helped Europe out of a tough patch after Russia’s full-scale invasion of Ukraine in February 2022, pumping gas in particular as much as it could. But it was richly rewarded, drawing accusations of being a war profiteer.

What it did provide was a new argument for continuing to exploit oil and gas, even as some argue that if it were true to its green credentials it would give up. For some time, Oslo argued it had some of the lowest emissions per barrel of any petroleum producer, and so it should be the dirtiest countries that stop. Since 2022, it has more emphasised that it is a reliable, long-term and democratic supplier, implicitly contrasting itself with the likes of Russia and even Qatar.

The tension is most apparent in EU-Norway relations. The bloc desperately needs the country’s gas but is refusing to officially endorse it for the long term, preferring to focus on greener technologies. Brussels and many member states would also like to see Norway share more of its abundant hydropower-based electricity, whereas local politics in Oslo are becoming increasingly protectionist on that front.

Verdict: Each case is debatable, but Norway’s balancing act to avoid being termed a hypocrite is getting tougher and tougher. (Richard Milne)

Power Points

Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu and Tom Wilson, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.