Oslo prioritises securing domestic consumption in the face of drought

Norway's lower exports aggravate Europe's energy supply crisis

photo_camera PHOTO/REUTERS - Pipeline image

Norway is outlining a plan to reduce energy exports to Europe, which would affect oil and gas. Several factors are coming together to make the Oslo government opt for this strategy, but the basic reason behind it is that it prioritises ensuring that domestic production is used to secure the country's supply.

In addition, the government puts reservoir recharge above electricity production when levels fall below seasonal averages, according to Energy Minister Terje Aasland.

For some European countries, Norway's policy may become a new hurdle as it faces a winter without being able to meet targets for gas stored in infrastructure such as underground storage facilities. The Scandinavian nation is one of the main exporters of electricity in Europe due to the power of its hydroelectric plants, which allows more than 20% of its electricity production to be exported to neighbouring countries.

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This difficult year in Europe also has another negative element: drought. And it is also affecting Norway, causing water storage levels in the south of the country to be below average, a scenario that has prompted Oslo to prioritise securing domestic supply ahead of electricity generation.

As Norway is not a member of the European Union, although it is part of the single energy market, it has more freedom to set its energy policy with respect to the principles of solidarity, which are now being called for more than ever in the EU with respect to saving and ensuring that demand is met.  However, it cannot stop exports to EU countries for long periods of time unless an emergency situation is declared, which the Scandinavian country wants to take advantage of.

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Meanwhile, the supply crisis is also worsening in eastern and central Europe. The Russian pipeline operator Transneft has reported that the Ukrainian company UkrTransNafta has stopped transporting Russian crude oil through the southern branch of the Druzhba pipeline, which supplies three European countries, due to Russia's failure to pay for transit because of sanctions imposed on Moscow.  Hungary, the Czech Republic and Slovakia are affected.

"UkrTransNafta stopped oil transportation services through the territory of Ukraine as of 4 August due to non-payment for the services offered," the company said. The risk that Russian oil will cease to circulate in the global supply is again putting pressure on oil prices.

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