Norway Intends to Offer Record-Level of Oil and Gas Exploration Blocks in the Arctic

Norway’s Ministry of Petroleum and Energy announced its intention to offer a record-level of oil and gas exploration areas in the Arctic. As part of the 2023 concession round the Ministry has plans to add 92 blocks in the north to the annual allocation area.

“Facilitating new discoveries in the north is important both for Europe, the country and the region,” explained Oil and Energy Minister Terje Aasland (Labor). 

In light of Russia’s war against Ukraine and the subsequent reduction of oil and gas imports to Europe, Norway’s role as a key energy supplier for Europe has become further elevated. The country is now Europe’s largest energy provider and supplied more than 40 percent of Germany’s gas needs at the end of 2022.

The 92 blocks consist of 78 areas in the Barents Sea and 14 areas in the Norwegian Sea. 

Climate goals and energy needs

Climate researchers highlight the contradictory nature of Norway’s climate and energy policy, which on one hand emphasizes the need to reduce harmful emissions from CO2, but on the other hand the country’s oil and gas exploration continues unabated.

“This proposal shows that despite increasing controversy around the future of Norwegian oil extraction, the current government seems committed to prolong the life of the industry,” says Bård Lahn, Senior Researcher at the Center for International Climate Research.

The government’s proposal not only signifies a renewed push for oil and gas resources but it also indicates that a growing share of Norway’s future oil and gas production will likely be coming from the Arctic. Environmental advocates have long pointed to the increased risks of opening up the sensitive Arctic environment to drilling.

“By expanding the northernmost areas available for exploration, the government pushes Norwegian production into the areas that are most risky both from an environmental as well as an economic perspective,” continues Lahn.

Redefining the Barents Sea

This week’s proposal would add new areas in the Norwegian and Barents to the annual licensing round, fundamentally changing how licenses are awarded in this area.

Last year the Socialist Left party (SV) had secured an agreement from the government to temporarily halt the awarding of new licenses in less explored or more frontier areas. Under the agreement no so-called numbered licensing rounds would take place prior to the next parliamentary elections in 2025. However, the government now appears to aim to reclassify large parts of the Barents Sea.

“The government response seems to be to redefine most of the Barents Sea to be part of well-known ‘mature’ areas, which enables them to award licenses through a different system (i.e. the APA, which happens annually). If the government succeeds in this move, the agreement with SV is rendered more or less meaningless,” explains Bård Lahn.

Europe’s growing energy needs has resulted in an opportunity for Norwegian providers to increase their market shares in markets like Germany and secure reliable and long-term demand. While Norway’s oil and gas sector is benefiting economically from the energy shock Europe experienced in 2022, catering to this short-term demand change may also be shortsighted, Lahn concludes.

“In this and other decisions, the government is using Europe’s short-term demand for gas and energy security to lock Norway into a fossil fuel dependent industrial trajectory for the long term. This seems like a rushed strategy.”