Gas crisis averted in Europe as Norway’s government intervenes to end workers strike

Gas exports from Nordic country could have slid 56% if the strike had continued, says Rystad Energy

The Valhall oilfield in the North Sea. Gas supplies to Europe could have been disrupted if a strike by Norwegian oil and gas workers had continued. AP
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A major gas crisis has been averted in Europe after Norway's government intervened to end a union strike in the country, according to Rystad Energy.

The Lederne union, representing more than 1,300 workers, went on strike this week, calling for more pay due to rising cost of living amid higher inflation.

Workers are now expected to return to work soon, while a settlement between the oil companies and the union is scheduled to be concluded at a later date.

“The strike … would have caused widespread disruption to several gasfields and pipelines, leading to a 56 per cent drop in Norwegian gas exports,” Rystad Energy analyst Lu Ming Pang said in a note.

The incident could have resulted in “knock-on” effects to major gas pipelines such as the Zeepipe and Langeled, as well as to major gasfields such as Troll and Ormen Lange, he said.

Had the situation not been resolved, the Title Transfer Facility, an establishment in the Netherlands for the virtual trading of natural gas, “would have been sent back close to, or even exceeding”, its record high of $65 per million British thermal units, which was reached in March, said Mr Pang.

Oil and gas from Norway, Europe's second-largest energy supplier after Russia, is in high demand amid the Ukraine crisis and subsequent sanctions by the US and its allies to curb most of the energy imports from Moscow.

Norway supplies 23 per cent of Europe’s gas.

“The loss of gas supply from Norwegian fields would have been a triple whammy for Europe, within just weeks of losing Russian flows and supplies from Freeport LNG in the US,” Mr Pang said.

Russian gas company Gazprom announced a reduction in Nord Stream’s capacity last month owing to what it said were technical issues with compressor units. The Nord Stream 1 gas pipeline is also due to be shut down for 10 days from July 11 for maintenance.

Meanwhile, supplies from the Freeport LNG terminal in Texas were disrupted last month due to an explosion and the subsequent shutdown of the complex.

A reduction in supply from Norway “would have come as a big shock as Norwegian fields typically provide stable flows in the range of 300 million to 350 million cubic metres per day”, Mr Pang said.

The Ormen Lange gas plant in Aukra, Norway. AP

Power prices in Europe, as well as in southern parts of Norway, would have surged if the strike had continued, the Oslo-based consultancy said.

“Given the swift and timely response by the Norwegian government, the message is clear that there should not be any doubts on the security of Norwegian gas supplies and that, now more than ever, the EU and allies must stay united to avert any future challenges that may come their way,” Mr Pang said.

The EU aims to diversify its energy resources and reduce its reliance on Russia, which provides the bulk of its oil and gas exports.

In 2021, the bloc's members imported 155 billion cubic metres (bcm) of natural gas from Russia, which accounted for about 45 per cent of its gas imports and close to 40 per cent of its total gas consumption, according to the International Energy Agency (IEA).

Russian pipeline gas exports to the EU will fall by more than 55 per cent between 2021 and 2025, but could decline more than 75 per cent in an accelerated scenario, the IEA said in a report this week.

However, the EU's commitment to phase out gas imports from Russia is having global repercussions as Europe’s surging demand for LNG draws in deliveries initially intended for other regions, it said.

In April, Italy signed an agreement with Algeria for 9 bcm of natural gas to reduce its reliance on Moscow for energy imports.

While gas demand fell after the end of the winter heating season, European utilities are racing to refill storage before next winter.

Updated: July 07, 2022, 8:41 AM
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