A series of stories about Norway as a nation caught in the middle of the climate crisis has been in the headlines in recent days and weeks, from CNN to Canada’s Global News to Vox. Analysts paint a picture of a tug-of-war contest fought on one side by oil and gas companies filling Norway’s coffers, versus the planet protectors who are waging the fight of their lives against climate change.
The pieces examine whether Norway (and others) is doing enough to reduce emissions all the while continuing to explore for more oil. The question leads to whether Norway can have its cake (oil and gas) and eat it too (be an environmental role model to the world).
Norway’s position is more nuanced, in my view, and the analysis fails to take into account the real, constructive role that Norway’s oil & gas industry plays in the interim before net zero is achieved.
“This fossil fuel product is best used before…”
Oil and gas producers of Norway are viscerally aware that dramatic change is in the cards for them, and that an expiration date has been clearly stamped on their primary product. The future is not one of infinite need for fossil fuels, and it requires an abatement of both supply and demand to correct and improve our planetary health.
Despite the alarm bells, oil and gas producers cannot turn a blind eye to the impact they have on the global economy, and the continued dependency on fossil fuels in much of the world. We can’t just shut off the tap without wreaking extreme havoc to the livelihood of people and nations.
DNV sought to address this issue in their Energy Transition Outlook towards 2050, stating the “rapid electrification of energy and growth in renewables will significantly reduce emissions in the coming decades, but fossil fuels will still be needed to supply half of the world’s energy in 2050.”
The report goes on to state that if (oil and gas) industry action doesn’t soon catch up with global climate ambitions, emissions will remain high over the next decades, something our planet cannot afford. But if the industry is able to “prepare for a future energy system that simply doesn’t accept the release of carbon emissions,” then perhaps we just might find a path forward in which everyone wins.
The path to this win-win is not an easy one for oil and gas. They are the ones in the hot seat, working to meet the still present demand for fossil fuels, while responding to new and continually mounting pressure, and simultaneously preparing to reinvent their role in the energy future.
The right set of incentives to shift
Norway’s carbon tax deductions are one way to incentivize the country’s oil and gas industry to make this marked shift, but an even stronger driver for change just may be the same government’s tax incentives to stimulate greater research and development across the sector. Norway has over time ensured favorable framework conditions for oil and gas companies, to support research and technology development. This has sparked close collaboration between oil companies, suppliers, and research institutions.
About a year ago now, in April 2020, as Covid-19 ravaged several industries including oil and gas, Norwegian Prime Minister Erna Solberg proposed a relief package to the industry. She did so because “the petroleum industry has been one of the main engines of the Norwegian economy for more than 50 years. If we lose the growth potential of this industry, we also lose much of the momentum in Norway’s transformation. We must transfer investments, capital, network and knowledge to emerging and new industries.” At the same time, the Finance Minister issued a warning that petroleum investments will fall in the years ahead, but at a manageable rate for the country’s economy.
It may be curious to encourage, even incentivize, research and development in an industry that many see as on its last legs. But it’s through this drive for innovation, that the ultimate energy transition will be enabled. These companies, with enormous resources and incalculable expertise at their disposal, are working to adopt new ways to power the world, to get to net zero, to boost efficiency, and to explore transferring knowledge to a cleaner and greener energy business. With this much to offer and this much at stake, not a single one has any intention of going quietly into the night.
As the leader of a software technology company that delivers solutions to the Norwegian oil and gas industry, among others, I see clear signals that we are in a new chapter in the story of the nation’s energy industry. It’s a story in which technology and the use of data play starring roles emerging in oil and gas’s successful transition.
I wouldn’t bet against Norway in this challenge
The Norwegian Continental Shelf is considered to be one of the most demanding places in the world to extract oil, and constant innovation and new technology has been the backbone of the nation’s success in these wild waters. This solid technological backbone will serve Norway and its industries well in the coming decades as the energy transition reaches its ultimate destination. It should also form the basis for innovations and technology that can be applied globally to transform industries into becoming safer, more effective, and significantly more sustainable.
John Markus Lervik is the founder and CEO of Cognite AS. Lervik has a Ph.D from the Norwegian University of Science and Technology, Trondheim, where he was awarded the Esso academic award for his PhD work.