Norway is an important supplier of oil and gas to the global market, and almost all oil and gas produced on the Norwegian shelf is exported. Company and government revenues from sales of oil and gas have played a crucial role in creating modern Norwegian society.
All licensees on the Norwegian shelf are responsible for selling the oil and gas they produce. The only exception is Equinor (former Statoil), which in addition is responsible for selling the government share of its oil and gas production (the SDFI share). This responsibility is set out in governmental instructions to Equinor.
Oil is a global commodity that is sold and delivered to most parts of the world. In contrast, there have historically been geographically separate regional gas markets. About 95 % of Norwegian gas is transported via a network of subsea pipelines to other European countries, while about 5 % is exported as liquefied natural gas (LNG). This is transported by ship from the Melkøya facility in Finnmark.
The production (well stream) from different reservoirs contains oil, gas and water in various combinations. To get marketable products, the production from the reservoirs must be separated and treated. The production from different reservoirs varies from oil with low gas content to almost dry gas (methane with only small amounts of other gases).
Crude oil is a fluid that is a combination of different types of hydrocarbons. The composition varies from field to field. The quality of the oil depends on several factors, for example how much and which substances, such as wax and sulphur, it contains. The composition also determines how light or heavy (viscous) the oil is.
Rich gas, or crude natural gas, is a mixture of various gases. When necessary, the gas is separated from the oil before the rich gas is treated in a processing facility that separates the dry and wet gas components. Dry gas is often referred to as natural gas, and consists mainly of methane, but also a little ethane.
Wet gas, or NGL (Natural Gas Liquids), consists of a mixture of heavier gases (ethane, propane, butanes and naphtha). In addition there are heavier condensates which some classify as a separate product. Naphtha and condensate are liquid at room temperature, while the lighter wet gas components can be made liquid either by cooling or adding pressure.
Not all gas that is produced is sold. Some of the gas is used to generate power on the fields, and small amounts are flared for safety purposes. On some fields, gas is reinjected into the reservoirs. Reinjection is often used to maintain reservoir pressure and displace the oil. This results in efficient recovery of the oil, and the gas is stored for possible recovery in the future.
In addition to the export value of crude oil, natural gas, natural gas liquids (NGL) and condensate, the Norwegian service and supply industry has a high international turnover. You can read more about their exports of goods and services in the article about the service and supply industry.
The total export value of crude oil, natural gas, NGL and condensate in 2017 was about NOK 442 billion (2018 NOK), or approximately half of the total value of Norway’s exports of goods. Oil liquids (crude, NGL and condensate) accounts for more than half.
Export value of Norwegian petroleum, 1971-2017
The numbers are inflated with CPI Norway. 2017 are preliminary numbers.
Source: Statistics Norway, table 08800
Norwegian oil production reached a peak in 2001, when total liquid production, including NGL and condensate, was 3.4 million barrels of oil equivalents a day, and then declined until 2013. However, since 2014 the oil production on the Norwegian shelf has been increasing again. Norway now supplies about 2 % of global oil consumption.
In 2017, Norway exported about 70 million Sm³ (1,2 million barrels per day) of crude oil directly to other countries in Europe, and 19 million Sm³ (0,3 million barrels per day) was delivered to onshore facilities in Norway. Crude oil purchasers are mainly refineries, which process the oil to produce fuel and other oil products.
The tables below show sales of crude, NGL and condensate in 2017, by first delivery point.
Norwegian oil deliveries in 2017, by first delivery point
Source: Norwegian Petroleum Directorate
Sale of NGL and condensate in 2017, by first receiving country
Source: Norwegian Petroleum Directorate
Oil was the largest energy source in 2016, followed by coal and gas. Oil meets about 33 % of total world energy demand.
What is oil used for?
The transport sector consumes more oil than any other sector. Within this sector, light vehicles account for about 46 % of consumption, heavy vehicles about 32 %, aircraft 11 % and shipping 10 %. The next-largest sector in terms of oil consumption is the petrochemical industry, and manufacturing of plastics is the most important branch of this sector. The petrochemical industry also includes the manufacture of other oil-based products such as paints, cosmetics and textiles and so on. Moreover, oil is used as fuel in other energy-intensive industries such as iron, steel and cement production. The other main use of oil is to generate electricity and heat, and as an input for asphalt.
Which countries produce oil?
The US was the largest oil producer in 2016, followed by Saudi Arabia and Russia. OPEC, the Organization of the Petroleum Exporting Countries, accounted for about 30 % of global crude oil production in 2016. However, several major oil producers, including Russia and the US, are not OPEC members.
The 15 largest oil producers in 2016
Source: BP Statistical Review of World Energy 2017
Transport of crude oil
In 2017, about 20 % of Norwegian crude oil production was transported to land by pipeline, and 80 % by tanker.
See article about the pipeline sysetem for more information about oil pipelines on the Norwegian shelf.
Oil is transported from many fields on the Norwegian shelf to the markets using shuttle tankers. These are specialised tankers that take on oil via offshore loading buoys on the oil fields. Oil platforms often have limited storage capacity, and regular calls by shuttle tankers are needed to avoid stoppages because of capacity problems. Shuttle tankers are usually used for relatively short transport distances, and most Norwegian oil is therefore delivered to destinations in north-western Europe.
Larger tankers are used to carry oil that is to be transported further, for example from Norway to Mediterranean countries, Asia or America. They do not carry oil directly from the offshore fields, but from onshore terminals, which are supplied either by shuttle tankers or by pipeline from the oil fields. Pipelines are used to transport oil from the Norwegian shelf to four onshore terminals: Sture, Mongstad and Kårstø in Norway, and Teesside in the UK.
Like oil, gas is one of Norway’s most important export commodities. The value of Norwegian gas exports in 2017, were only marginally lower than the value of Norwegian oil exports. Domestic consumption of gas in Norway is very low, and nearly all the gas produced is exported.
An extensive network of subsea pipelines links Norway’s offshore gas fields and onshore terminals directly to other recipient countries in Europe. The total length of the Norwegian gas pipeline network is about 8 800 kilometres, which is roughly the distance from Oslo to Bangkok. See article about the pipeline system for more information about the gas pipelines on the Norwegian shelf.
In addition, liquefied natural gas (LNG) is shipped out from the Snøhvit field off Hammerfest on LNG carriers. Less than 5% of Norwegian gas exports is LNG.
Liquefied natural gas, or LNG, is produced by cooling and pressurising natural gas to a liquid state. It is transported on dedicated LNG carriers.
The advantage of LNG is that transport does not require pipelines, and it can therefore be sold anywhere in the world. However, conversion to LNG and transport by LNG carrier is considerably more energy-intensive and expensive than pipeline transport.
At present, only gas from the Snøhvit field is converted to LNG on a large scale in Norway. Globally, the supply of LNG is expected to increase rapidly over the coming decades, driven by developments in the United States, amongst others and increasing demand, primarily in Asia.
Norway is the third largest gas exporter in the world and the second largest source of European gas imports. Norwegian gas exports were record-high for the third year in a row in 2017, and Norway exported about 122 billion Sm3 gas, mainly to other countries in Europe. The gross energy content in the total volume of Norwegian sales gas corresponds to about ten times normal Norwegian electricity production
In much of Europe, gas is an important source of energy for heating homes and industrial buildings, gas is used for cooking, as feedstock in industrial processes and is used in gas-fired power plants to generate electricity. Norwegian gas provides about 25 % of the EU's gas demand and makes an important contribution to energy security in Europe.
How is natural gas used and what is driving growth in consumption?
Natural gas meets about 23 % of total world energy demand, and thus, like oil, plays a very important part in meeting global energy needs. Natural gas is used mainly for heating homes and commercial buildings, cooking and power generation and in the petrochemical industry.
Many of the products we use every day, such as cell phones, makeup, sunglasses, computers, medications and fertilizers for agriculture are made with natural gas as a feedstock. Natural gas is transported by pipeline or is cooled and pressurised to produce LNG, which is transported on LNG carriers. Economic growth, the prices of alternative energy sources, weather, temperature, climate change adaptation and mitigation measures are all factors that influence gas demand.
Using gas instead of coal for power generation can yield considerable reductions in greenhouse gas emissions. Europe and the rest of the world use a lot of coal for power generation. In electricity production, gas emits approximately half as much CO2 as coal. Replacing coal with gas in power generation is a simple, efficient and cheap way to quickly reduce greenhouse gas emissions and improve air quality. The UK serves as a good example. In 2016, the UK managed to reduce CO2 emissions from power generation by nearly 60% or 25 million tonnes of CO2 because gas replaced coal. In comparison, 25 million tonnes CO2 corresponds to about half of Norway's total CO2 emissions.
Gas is also a good partner for intermittent renewable energy. Unlike hydroelectric power, other renewable energy sources such as sun and wind cannot be stored over time and are as such less flexible. In the absence of effective storage capability of energy, gas can produce power when the sun does not shine and the wind does not blow. As Europe is getting more and more intermittent renewable energy sources, the more Europe will need the kind of flexibility gas can provide in order to balance fluctuations in the energy supply and ensure that consumers have reliable power supply.
Gas exporting countries
Norway is the third largest gas exporter in the world. Several of the world’s largest gas producers export little to other countries. When assessing the global gas market, it is therefore most important to consider which countries have the largest volumes available for export.
Norwegian net gas exports in 2016 compared to other gas exporting countries
Source: IEA Natural Gas Information 2017
Only about one third of the Norway’s estimated gas resources have been produced so far. Production is expected to remain high for the next 20 years. The forecast is that another third of the resources will be produced during this period, and the final third can be produced after 2035. If the most optimistic resource estimates prove to be correct, production figures will be higher than the current forecasts.
Most Norwegian gas sold on the European market is delivered to Germany, the UK, Belgium and France, where Norwegian gas accounts for between 20 and 40 % of total gas consumption.
Norwegian natural gas exports in 2013-2017 by first delivery point
Source: Norwegian Petroleum Directorate / Gassco