Lars Nordrum, Norway’s ambassador and Dr. Mohammad Hussein Adeli, former secretary-general of the Gas Exporting Countries Forum, attended a meeting on “The Role of Energy in European and Regional Geopolitical Developments” held on Tuesday (Sept. 26) hosted by the Strategic Council on Foreign Relations (SCFR).

Different geopolitical dimensions of gas in various parts of the world were addressed and finally the participants’ questions were answered.

Lars Nordröm, Norway’s ambassador to Iran, on energy status in Norway and its policies, said energy’s primary task is to develop a coordinated and coherent energy policy [with an] overriding goal to ensure high value creation through the efficient and environmentally-friendly management of the country’s energy resources.

He said energy has been crucial for the development of modern Norway. Historically, he said, Norway was long dependent on energy sources such as coal and imported oil to sustain its energy demand. However, much changed when we started developing hydropower in the late 19th century, he said.

He noted that hydropower is still Norway’s most important source of energy, accounting for 94% of its total energy consumption. “Currently, Norway has 60 hydropower plants spread across the country. Today, wind power generates 3.5% of the energy Norway consumes, but this will increase.”

Wind power, although not as flexible as hydropower due to the dependence on wind, presents a viable solution for the future, said the ambassador, adding: “It is a clean and renewable source of energy, and it is cost effective: production prices have decreased by 70% over the last 10 years.”

He also noted that although renewable energies do not play a significant role, they are also not without role; one out of two cars sold in Norway is electric and technology has played a significant role in the recent changes.

Crude oil is one of Norway’s most important export commodities. In 2018, export of crude oil constituted 26% of Norway’s total exports. The same year, approximately 1.2 million barrels of crude oil were exported to Europe per day. We export around 90% of our oil to the EU. On a global scale, we produce around 2% of the total oil demand.

A network of subsea pipelines links offshore gas fields and onshore terminals directly to recipient countries in Europe. Germany, Great Britain, Belgium and France are the biggest importers of Norwegian natural gas. The export of petroleum, i.e. both oil and natural gas, is expected to constitute 40% of Norwegian exports in 2019, or 16% of the GDP.

The Norwegian ambassador on Iran-Norway energy cooperation stated that the two countries have been very close in the field of oil and gas, as in the 1990s and 2000s three Norwegian oil and gas companies were active in Iran and then the partnership was further enhanced by the signing of the JCPOA But with Trump’s pullout from the agreement, conditions have changed and it is hoped that these companies will return to Iran when the situation is normalized. He added that two years ago when he visited Iran, a Norwegian company was the largest producer of Iranian fleet, but its activity was also halted as a result of Washington’s unilateral sanctions.

Ambassador Nordrum also mentioned creation of a Pension Fund with oil and gas revenues, taxed at 78%, being the backbone of the Fund. Established in 1990, the Fund is an instrument for securing long-term thoughtful use of Norway’s oil and gas revenue, he noted.

The Fund has invested globally in international equities (amounts to roughly 60%), fixed income (amounts to roughly 35%) and real estate (amounts to roughly 5%). The purpose of this diversification is to reduce risk. By spreading the assets across countries, sectors and companies risk is further reduced. This way, we are mitigating the volatility stemming from fluctuating oil prices, financial markets, interest rates and real estate bubbles. A budgetary rule, passed by Parliament in 2001, prevents the government from spending more than the Fund’s expected annual return, which is between 3% and 4%. The reserves of the Pension Fund stand at 1000 billion dollars.

On energy supply to Europe, the ambassador said: “A decade ago, Russia began using gas that was politically motivated and there were fears that Moscow may cut off gas supplies to Europe; Europeans however were eager to diversify supplies and Norway managed to provide gas to Europe as a stable supplier. And for gas to be sustainable for Europe; ideally, we should base all policies on commercial interests.”

 

Growing Global Demand for Gas

Former Secretary-General of the Gas Exporting Countries Forum (GECF), Dr. Mohammad Hussein Adeli, addressing the event said oil has a single global market but that gas has different world markets in the US, Europe, Asia Pacific, East Asia and the Middle East, adding that two major reasons pushed demand up: 1. Increasing global population and consequently expanding the phenomenon of urbanization that increases the need for gas consumption. It is estimated that the world population will reach 9 billion by year 2050 which means rising need for energy. 2. Boost in global economic growth which is driven by greater use of energy, especially gas. He added that Asia’s share of demand for gas is higher than others, with India and East Asia being the major consumers of gas.

The demand for energy is projected to increase by about 30% by 2050, the gas expert said, citing the growing global demand for gas. The importance of gas goes beyond coal in 2025 because gas and coal are always competing in price. It is estimated that the oil peak will be around 110 to 112 million barrels per day around 2035; then the peak will decrease and reach gas.

Adeli went on to note that while gas accounts for 23% of the global energy today, that number will reach 27%t by 2050. Conversely, oil will drop from the current 32% to 26% in 2050. Renewable energy consumption will also increase from 2% percent today to 9% in 2050.

Former GECF Secretary-General emphasized that global demand for gas will increase by about 53% by 2050: Under such conditions, countries with gas resources will dominate the energy sector of the world. He described the electricity, industry and transportation sectors as the main consumers of gas resources in the world, which could significantly reduce greenhouse gas emissions.

“Demand for LNG consumption has grown dramatically today because it does not require gas pipelines,” Adeli said, emphasizing the growing global demand for LNG. He added that countries like China and India, where gas is difficult to pass through pipelines, are turning to LNG. He also noted that the tension in the Middle East has made it difficult to use the pipelines for gas transportation and this has raised global demand for LNG.

Elsewhere in his address the former GECF Secretary General referred to the geopolitical study of gas in different parts of the world and said: Since the formation of Shell Oil and Shell Gas companies, the United States has put its policy on increasing oil and gas production since that time in order to become an international oil and gas player.

As Trump has extended great help to many US oil and gas companies and abolished all of Obama’s environmental concerns the United States will remain a global player in oil and gas sector. On the other hand, Europe has pursued its policy of reducing fossil fuel consumption and boosting renewable energy production. Latin America has also focused more on renewable energy production, so it is not a major player in the oil and gas sector. India is also looking to consume more gas. It is still the largest coal consumer in the world, and is also set to produce more renewable energy. China is both a producer and consumer of fossil energy. However, the country is looking to consume more gas than oil. China is also stepping up subsidies to generate and boost more renewable energy. The Japanese continue to seek nuclear power. As much as 20% of Japan’s energy basket is nuclear power. Of course, they will also keep gas consumption at a moderate level.

The gas expert cited key players in terms of production by US, Russia, Iran, Canada and Qatar respectively. He also identified key gas players based on proven resource levels in the Middle East, Russia, and Asia Pacific, respectively. Russia and Qatar have the highest capacity to export gas, he said.

On the oil and gas prospects, Adeli also cited a number of key points:

  1. Currently, the US and Russia are competing against the two markets of Asia Pacific and Europe
  2. Competition over control of energy resources in the Middle East will increase, with Iraq, Saudi Arabia, Kuwait and Iran at the forefront.
  3. Diversifying energy sources will become the biggest challenge for importers and exporters. While 80% of Qatar’s gas exports were headed to China and Japan, the main destination is Europe now. For importers, this is also a challenge where to turn for their supplies.
  4. Global gas prices will become a major challenge, especially for the United States.
  5. Russia is the dominant gas player in Europe and Asia Pacific.
  6. The Middle East is very important to the US as it is the main supplier of energy to China and India. That is why it is important for the US to control the energy resources of the Middle East. Therefore, creating tension in the Middle East and disrupting the energy supply is on the US agenda.

 

Former GECF Secretary-General on Iran’s role in the global gas markets also stated: One of the main obstacles to non-export of Iranian gas is excessive domestic consumption which is beyond the standard. He added that the United States has also thrown obstacles in the way of Iran’s exports, especially on completion of the peace pipeline (IPI Pipeline). In such a situation, Iran should move towards producing LNG, which does not require pipelines for export.