Norway's oil and natural gas reserves

With its large reserves of oil and natural gas, Norway plays an important role in the global energy market. It exports nearly all the oil and gas it processes, making it an important source of energy, particularly because it is not a member of the Organization of Petroleum Exporting Countries (OPEC). Its major market is the European Union.

The Country

Norway is located in northern Europe and is part of the Scandinavian Peninsula. It is bordered by the Norwegian Sea to the west, the North Sea to the south, and the Barents Sea to the north. It shares its eastern border with Sweden, Finland, and Russia. Norway is a mountainous country with high plateaus. The northernmost part is in the Arctic tundra and is covered with glaciers. Norway also has a considerable number of valleys and some plains, which are suitable for farming. The coastline is broken by a large number of fjords and has numerous adjacent islands. Lakes and rivers abound in the valleys. Norway’s key resources are hydropower, oil, natural gas, forests, and fisheries.

In 2023, according to the World Factbook, Norway ranked eighth in real GDP per capita purchasing power parity, with $90,500. That same year, the World Economic Forum placed Norway seventh in the world on its Global Competitiveness Index. Norway is also important in the global market as a producer of hydropower and as a source of hydropower technology, an expertise which it shares with developing countries. As the second largest exporter of seafood, Norway plays an important role in supplying fish to the global market. It is also a significant supplier of timber and paper products.

Oil

Oil, a liquid form of petroleum, is extremely important to the economy of Norway. The country’s oil resources are all located offshore, in the North Sea and the Norwegian Sea. In 1960, oil was discovered in the Norwegian coastal shelf in the North Sea. By 1975, Norway was playing a significant role in the oil export market, and in 1996, Norway ranked third in the world as an exporter of crude oil. Oil has provided the impetus that has enabled Norway’s economy to surpass those of its neighboring countries of Sweden and Denmark. Domestically, Norway was able to manage its oil reserves so that oil provided 30 percent of the state revenues. The government has achieved this situation by state participation in and control of the oil industry. Among the oil-producing companies in Norway, Equinor (formerly Statoil Norge AS) is owned by the Norwegian government. There are also a number of private operators. This achievement is in contrast to the majority of resource-rich countries that usually do not see economic growth as a result of their resources. Norway has concentrated its efforts on the discovery of oil and its extraction because oil is the highest priced per-unit resource in the energy market. This focus has required the country to develop innovative technology for the extraction of its oil, which, because it is located underwater, is more difficult and costly to obtain than underground oil. This is perhaps one of the reasons that Norway has experienced favorable economic growth. By 2024, Norway was the largest producer of crude oil in Europe, after Russia. The country exported almost all its oil, while relying upon hydropower and firewood to meet its domestic energy needs. Oil account for approximately 25.9 percent of Norway’s exports, and Norway ranked eleventh in oil exports globally. Aware that the country’s oil supply will eventually reach a point of depletion (at which extraction will no longer be economically feasible), the Norwegian government enacted a policy of saving almost the entire revenue from petroleum in a sovereign wealth fund.

Natural Gas

Norway’s natural gas reserves, like its oil reserves, are located offshore. The first reserves were discovered in the North Sea; later, more reserves were found in the Norwegian Sea and the Barents Sea. These reserves have placed Norway eighteenth in the world in natural gas reserves. The Norwegian government plays a dominant role in the country’s natural gas industry. The leaders in exploration and production of natural gas are Equinor and Norsk Hydro, both government-owned firms. For the most part, international commercial companies that are involved in the Norwegian natural gas industry work in partnership with the two state-owned companies. All companies working the offshore gas and oil fields must obtain licenses from the Norwegian government.

The natural gas produced from the offshore deposits is of two different kinds: associated and nonassociated gas. Associated gas is gas that is dissolved in oil and is retrieved along with oil. It must be separated from the oil and cleaned before it is compressed for transport by pipeline. Nonassociated gas is contained in reservoirs that are gas dominated. When it reaches the surface from the wells, it needs only to be cleaned and compressed for transport. Most of the gas is immediately loaded onto tankers and transported to refineries; however, some is transported by pipeline to terminals near Bergen. From there, it is processed and sent to the European Union and other countries of Western Europe. A small amount of the gas is processed offshore and is exported to the United Kingdom and the Netherlands.

Domestic consumption of natural gas is limited. According to the World Factbook, in 2022, Norway produced 123.727 billion cubic meters of natural gas. Of this, it consumed 4.548 billion cubic meters and exported 121.285 billion cubic meters. Domestically, Norway used natural gas for generating power offshore and for producing methanol and processing gas on land. Globally, in 2021, Norway was the third largest exporter of natural gas and was an especially important supplier for the European Union.

Hydropower

Hydropower has been an important source of energy in Norway since the early nineteenth century. Norway’s hydropower comes from its vast number of waterfalls and, as an industry, has allowed Norway to become an industrialized nation. In the early twentieth century (1910 to 1925), the first major expansion of the Norwegian hydropower industry occurred. The development of hydropower and the building of hydropower plants increased immensely after World War II, especially from 1960 to 1985, and has continued to expand.

Hydropower uses water to produce energy. It provides a clean, renewable source of energy. It does not produce greenhouse gases. However, the exploitation of waterfalls and the modification of river flow, coupled with water storage by use of reservoirs and dams, impact the environment and result in some environmental problems. This is especially true in terms of fish and biodiversity. Norway is addressing these issues and working to maintain a strong hydropower industry while protecting its waterfalls, rivers, and ecosystems. Hydropower in Norway is almost completely under government control; the state, counties, and municipalities own the majority of the hydropower plants. No development of water resources may be undertaken without authorization by the central government. Those operations that are privately owned are state licensed, and at the end of the license duration, they are placed under public control.

Norway was the largest producer of hydropower in Europe in 2023. According to the World Factbook, about 89 percent of the country's electricity came from hydropower during that year. Norway's aluminum, electrochemical, and electrometallurgical industries depend on hydropower as their major energy source. Norway participates in power trade with its neighboring countries under the direction of Nordel and Nad Pol. The power trade is accomplished by the use of cables. Norway is extremely important to Europe as a source of hydropower storage capacity. Not only does Norway export electric power, but the country also is instrumental in assisting other countries in the development of hydropower through sharing its vast knowledge of hydropower development and uses.

Forests

With roughly 33 percent of its land in forest as of 2022, Norway has an important forest industry. The country’s forests provide a variety of products, including logs, sawed lumber, paper, and pulp. Norwegian forests cover 122,000 square kilometers. Some 86,600 square kilometers of its forest is used for the production of timber and forest products. Unlike the hydropower, oil, and gas industries, Norway’s forests are primarily under private ownership. Throughout its history, Norway has carefully managed its forests by policies of protection and regeneration. These practices have resulted in an annual increase in biomass each year. One of the most important techniques in forest management used by Norway is that of cutting fewer trees each year than the annual increase in trees will permit. These practices have given Norway a healthy, large forest that annually produces a high yield of timber. An added benefit for the country has been the reduction of greenhouse gases. Norway developed a national parks project that raised the amount of protected forest in the country to 15 percent by 2010.

Much of the felled timber that goes to sawmills and becomes sawed timber is used within the country. Wood is the major material used in construction in Norway, particularly in the construction of residential buildings. Although Norway relies heavily on hydropower for energy, firewood remains a significant source of energy for heating private homes. Norwegian wood and forest products are also important in the global market. Paper and pulp products dominate the Norwegian trade in forest products. Norway exports approximately 1 million metric tons of newsprint each year. Western Europe is the primary market for newsprint as well as higher grades of paper important in the book-publishing industry. Other exported Norwegian wood-derived products include packing paper, pulp made from ground wood fiber, and pulp produced by boiling the wood in a chemical solution. Norway’s forest industry contributes slightly less to the economy than the fishing industry does, but it outperforms the aluminum industry as a source of export revenue.

Fisheries

Fisheries always have been an important segment of the Norwegian economy. Worldwide, the fishing industry has experienced a decline in fish and shellfish populations, a decline in the number of different species, and a change in location of certain species because of climate change, pollution, and exploitive overfishing. Norway’s coastal waters in the North Sea, the Norwegian Sea, and the Barents Sea provide evidence of this decline; Norway is implementing policies and laws to combat this problem and to preserve its valuable resource of fish and shellfish. In response to a continuing decline in the stock of coastal cod, which began in 1994 and continued steadily through 2004, Norway enacted restrictions on the commercial fishing industry’s ability to take these fish. The policy has had positive effects: The stock of coastal cod in the Barents Sea increased such that, although quotas were still in effect on these fish, the number that could be caught was increased. Norway also participates in discussions and efforts with the European Union to establish a bilateral fisheries agreement to reduce the amount of fish caught and discarded by fishing companies fishing for specific types of fish.

In addition to placing controls on fishing in coastal waters, Norway has developed and promoted aquaculture, a process that involves farm raising of fish. The government funds research and development in aquaculture. In 2009, the Norwegian government established sixty-five new licenses for the farming of salmon, trout, and rainbow trout. Five of these licenses were restricted to firms practicing organic aquaculture. The two major species raised in aquaculture are Atlantic salmon and rainbow trout. Aquaculture accounts for much of the value of Norway’s fish exports.

In 2024, Norway exported a record 2.8 million tons of seafood. That year, it was the largest fish exporter in the world. Norway exported a large variety of fish and shellfish, including herring, mackerel, haddock, cod, and salmon.

Other Resources

Norway is not significantly rich in minerals but does have deposits of iron ore, copper, lead, zinc, titanium, pyrites, nickel, olivine, and carbonate. Deposits of olivine are particularly good in the region of Åheim. Olivine has a number of important industrial uses: as a slag conditioner in pig-iron production, in abrasives, and in the making of exterior covers of subsea pipelines. Norway also has several important deposits of marble and limestone in Verdal. Norway is an important supplier of both carbonate slurry and liquid marble slurry to the paper manufacturing industry. Both slurries are used in the coating of paper. There are significant deposits of zinc and copper in the provinces of Trondheim and Røros.

Bibliography

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