How hypocritical is Norway on energy matters?

Good morning and welcome back to Energy Source, coming to you this week from London and Oslo.

In M&A news, consolidation in the US shale oil sector continues, this time with yesterday's announcement of Diamondback Energy's $26 billion alliance with Autry Stephens' Endeavor Energy Resources . That brings us to four multibillion-dollar shale deals in the last five months.

Meanwhile, in Europe, last week I sat down with veteran TotalEnergies CEO Patrick Pouyanné for a wide-ranging interview. Since rising to the top of the business in 2014, Pouyanné's strategy and messaging has been among the most consistent in the industry and it's not going to change now.

Policymakers and activists were naïve, he argued, to think that it would be possible to reduce oil and gas production before enough renewable energy was available to take its place, given the continued growth in global energy demand.

He warned that governments were underselling the energy transition, failing to recognize that this would lead to higher costs. “We believe that fundamentally this energy transition will mean higher energy prices,” she told me.

Read the full interview here, where Pouyanné rejected any interest in taking action for all or part of BP, said renewable energy companies remained overvalued and called on European leaders to negotiate a free trade deal to protect natural gas shipments blended from the United States.

Now from the French boardroom to Oslo, where our Nordic correspondent, Richard Milne, has delved into the energy paradox that is Norway.

Thank you for reading – Thomas

Is Norway an energy hypocrite?

The wealthy Nordic country is Western Europe's biggest oil producer, but it also likes to tout its green credentials. Its sovereign wealth fund, the world's largest, is funded entirely by oil and gas revenues, yet it is increasingly critical of big business. Its huge production of renewable electricity and strong support for electric vehicles are accompanied by support for deep-sea mining, extensive Arctic drilling, and other environmentally questionable practices.

“External pressure on Norway is increasing. The contradictions are increasingly evident. It's going on for now, but I don't know if it can go on forever,” said a Norwegian CEO.

Environmentalists, and many capitalists too, are quick to call him hypocritical, saying one thing and doing another. But the Oslo government talks more about paradoxes, arguing that it is the preferred democratic supplier of oil and gas to Europe, while weakening itself by providing some of the world's most generous subsidies to convert cars, buses and ferries to free energy. of fossils.

It is worth taking a look at several recent developments to examine the charges.

Exhibit A: Norway's $1.5 trillion oil fund slammed ExxonMobil for suing two small groups of climate shareholders.

Critics on both sides are quick to call out the hypocrisy. An oil fund that criticizes oil companies?

But the fund and Oslo argue that it is a financial investor created to diversify Norway's income away from oil. The fund itself even recommended abandoning all oil and gas stocks in 2017, only to be rejected by the government. In that case, being an active investor who pressures oil and gas companies to take climate change seriously (and fire critics) would be a rational action.

Exhibit B: Norway's parliament voted last month to open up to deep-sea mining in and around the Arctic.

The decision to allow exploration and potentially extraction has drawn criticism from everyone from environmentalists and fishing groups to big business and, most recently, the European Parliament. The latter last week expressed “concerns” and called for a moratorium on deep-sea mining.

Several of the world's largest companies have pledged not to use minerals mined from the seabed, while many countries have also sworn not to do so, leaving Norway in uneasy company alongside China, Russia and India, among others.

Officials in Oslo respond that deep-sea mining is likely to be necessary to meet demand for minerals for the green transition without becoming too dependent on China. They add that any extraction in Norwegian waters would be subject to additional parliamentary approval and will not be carried out if the environmental cost is too high.

But for environmentalists, moving forward with such a controversial technology fatally undermines Norway's claims to support sustainable oceans. “Norway talks well, but let's look at their actions: they are often exactly the opposite,” said one non-Norwegian activist.

Exhibit C: Norway's continued drilling for oil and gas in the Arctic, as well as its increasing use of the argument that it is the largest democratic supplier of oil to Europe.

Norway certainly helped Europe out of a rough patch following Russia's full-scale invasion of Ukraine in February 2022 by pumping gas as much as it could. But he was handsomely rewarded, prompting accusations of being a war profiteer.

What it did provide was a new argument for continuing to exploit oil and gas, even as some argue that if it were true to its green credentials it would give up. For some time, Oslo argued that it had some of the lowest emissions per barrel of any oil producer, so it should be the dirtiest countries that stop. Since 2022, it has further emphasized that it is a reliable, democratic and long-term supplier, implicitly contrasting itself with countries like Russia and even Qatar.

The tension is most evident in EU-Norway relations. The bloc desperately needs the country's gas but refuses to officially back it in the long term, preferring to focus on greener technologies. Brussels and many member states would also like to see Norway share more of its abundant electricity from hydropower, while local politics in Oslo are becoming increasingly protectionist on that front.

Verdict: Each case is arguable, but Norway's balancing act to avoid being labeled a hypocrite is becoming increasingly difficult. (Richard Milne)

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Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu and Tom Wilson, with support from the Financial Times' global team of reporters. Contact us at energy.source@ft.com and follow us on @FTEnergy. Catch up on previous editions of the newsletter here.