Europe faces further pressure in securing supplies ahead of the cold winter months, after Norwegian oil and gas workers went on strike today following an escalating dispute over pay.
It is the first day of planned industrial action which could cut the country’s gas exports to the rest of Europe by as much as 60 per cent and exacerbate supply shortages, amid Russian retaliation to Western sanctions following the invasion of Ukraine.
Daily gas exports from Norway could be cut by 1.2m barrels of oil equivalent per day from by Saturday, revealed the Norwegian Oil and Gas (NOG) employer’s lobby.
Members of the Lederne labour union, who make up around 15 per cent of the country’s offshore industry work force, turned down a pay rise of between 4-5 per cent .
Norway’s other oil and gas labour unions have accepted the wage deal and will not go on strike.
Industrial action began at midnight local time at three fields – Gudrun, Oseberg South and Oseberg East – and is set to expand to three more – Kristin, Heidrun and Aasta Hansteen – from midnight later today
Norway is both the UK’s largest energy supplier and the European Union’s (EU) second-largest after Russia for both oil and supplies.
Oil and gas from the country is in high demand after Russia cut off gas flows into multiple European countries that refused to pay for its supplies in roubles, and after it cut over half its gas flows into Germany via the Nord Stream 1 pipeline.
The Nord Stream 1 gas pipeline is due to shut for maintenance from 11 July for 10 days, with growing fears it could stay permanently closed to put more pressure on the West after the UK, US and EU imposed sanctions on its fossil fuel supplies.
Gas prices have spiked following industrial action in Norway, with the UK’s day-ahead gas price peaking at a three-month high of 272.5p a therm on Tuesday, up 17.9 per cent.
Gas for delivery prices for next month rose 7 per cent at 302p a therm.
On Tuesday evening, UK and Dutch benchmarks were still up eight and four per cent respectively,
UK urged to ramp up domestic energy generation
The UK receives around 75m cubic metres a day from Norway, about a third of its gas supplies, with the majority of flows coming via the Norway-UK pipeline.
Langeled’s terminal at Easington has brought in 70 per cent of UK imports from Norway between Jan-Apr this year and was accountable for 67 per cent of imports from Norway in 2021.
If this shut due to strike action then it could soon have a material impact on UK gas supply.
Ross Dornan, market intelligence manager at Offshore Energies UK, which represents the UK’s offshore oil, gas and wind industries, suggested that theUK’s own gas resources meant it was partially protected from the impact of any Norwegian shutdown.
He explained: “In recent days the UK has been consuming just over 100m cubic metres of gas per day, most of which comes from its own continental shelf but topped up by sources like Norway. Our demand increases substantially in winter which is when we are reliant on Norwegian gas.”
Dornan believed the UK’s own offshore gas fields give us vital protection against shortages and that “without those resources we would be at risk of gas rationing and even power cuts within days”.
“So this strike in Norway is not just a threat. It’s also a very timely warning of the danger of not having investing in our own energy supplies,” he concluded.
Andy Mayer, energy analyst at free market think tank the Institute of Economic Affairs argued that the supply disruption from Norway and Russia highlighted the importance of the UK securing its own fossil fuel supplies.
He warned the supply shortages will dent UK and European efforts to shore up supplies this winter, and called on Downing Street to green light fracking and lift its costly Energy Profits Levy on North Sea oil and gas operators.
He said: “Instead of encouraging domestic production as a hedge against these extreme but predictable risks, the UK is still dithering on lifting the ban on fracking, tinkering with expensive new climate regulations on the North Sea, and discouraging investment with a windfall tax. This behaviour is extremely dangerous. By prioritising net zero virtue signalling, the government risks imminent dangers to our domestic security, health, and prosperity today.”
The Government is expected to receive the latest scientific study from the British Geological Society this week.
Fracking was halted in 2019 across the UK amid safety fears, with the Oil and Gas Authority (now North Sea Transition Authority) raising concerns over tremors.
If the study suggests potential earthquakes can be avoided or mitigated, the industry could be revived as soon as this winter.