STAVANGER (Nettavisen): At one of the world’s largest meeting venues for the energy industry, ONS in Stavanger, conversations abound about green transformation and renewable energy both on and off the stage.
Participating as speaker, panelist, partner and energy analyst at Pareto, Nadia Martin Wiggen.
We must invest in oil and gas to prevent a crisis much worse and longer than the one we are experiencing right now, she tells Netavisen.
There will come a point when we will have a lot of energy, but we don’t know when that will be. Only when we have a surplus of it can we make a change, not before.
Expensive now, but prices will come down
Wiggin explains that there has been a market cycle, and he highlights the shale oil revolution as an example. Higher oil prices, and in this case energy prices, stimulate increased investment, innovation and production, eventually even higher production.
It’s the natural course of commodity cycles, she says.
Had it not been for the high oil prices between 2010 and 2014, shale oil production would not have developed further. Thus, the drop in oil prices would not have come as a result either.
– That’s the point. We should not fear courses. The head of the International Energy Agency said during the opening ceremony at ONS that the time for cheap energy is over. Nonsense! It’s a cycle and now we’re in the costly part of the cycle, prices will drop again.
An energy analyst assures that you find a substitute when you have abundance, not when you have a deficit.
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US and Norway push up prices
The government is considering downsizing Electricity exports to Europe, after a summer marked by record-high electricity prices and a record-low filling of water tanks in southern Norway. In addition, you have The United States has discussed not exporting oil.
– This exacerbates the situation and creates inflation. Free trade leads to lower inflation, as there is more competition and more resources to choose from, including different types of energy. We are now discussing going in the opposite direction because we have inflation.
Wiggin further believes that the government feels it must take action.
– But investments and the current framework are the easiest way to do it. We have experience in oil and gas in terms of development permits and that kind of thing. If Equinor says it takes eight years, it will take eight, not twelve.
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– The market is not working
When asked if the gas market works in today’s market, Wiggin replied that the market works in the sense that you are building storage for the winter.
The prices show that you have to build up stock, but when the demand rises, in addition to the fact that prices usually rise in winter due to the temperature, it usually gives a signal that you have to produce more. But we don’t have the resources to reach Europe at the moment.
Industrial demand for gas is down 20 percent compared to last year’s summer.
When you do not have the resources to make supplies, the price must work so that demand is forced down.
Wiggin explains that you don’t see companies committing to producing more gas, which means gas and energy prices have also gone up for next year, and the year after.
– Prices are much higher. The market does not work in the sense that prices far exceed the actual costs of producing more gas or energy. This also happens because they drive prices to the point of destroying demand, so additional supplies can enter the market.
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Spend money on shareholders
Wiggin also believes that companies in the oil and gas sector have focused on winning back shareholders after the pandemic. She says they have focused on paying down debt, paying dividends, and investing less in oil and gas production than the price usually indicates.
– In addition, some companies are shifting their focus and identities towards renewables – the case of Equinor – while sales have made large oil companies Vår Energi a separate oil and gas producer for investors who don’t want oil, gas and renewable energy within a single company strategy.
Wiggin also says that in one panel during ONS 2022 with Equinor, they appeared to have more uncertainty about oil demand due to the renewables target in 2030 and 2032.
– Corporate moves against shareholders took place instead of drilling for oil and exploring more. Perhaps they feel safe expecting all energy to be renewable in 2030 and 2032. Why invest for eight years, if you only need oil and gas for another two years? The power analyst asks adding:
– However, the European Union’s statement on the deregulation of gas prices from energy prices pushed prices down from record levels across Europe. This may have happened because power brokers interpreted the ad as a desire by politicians to cap power prices this winter.
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Electricity market crisis meeting
European Commission President Ursula von der Leyen said on Monday that the European Commission is planning an emergency reform of the electricity market to stem a violent price hike.
As early as Friday 9 September, EU energy ministers will hold talks on reform in Brussels.
– The violent rise in electricity prices is now showing the limitations of how the electricity market is designed, von der Leyen said Monday during a strategy forum in the Slovenian city of Bled.
Among the proposals that garnered support in European capitals is to separate electricity prices from gas prices.
– Even if you remove the gas component, we still have a water problem. We need to fill up the magazines, but there’s a drought, Wiggin explains.
She added that since the beginning of the year, the number of nuclear power plants operating in France has been halved due to corrosion problems.
– Removing the gas component is complicated and doesn’t really solve the problem. Lack of supplies is the problem, we need to curb demand.
Who benefits from the separation of electricity and gas prices?
It can help industrial companies on the brink of bankruptcy due to rising energy prices, but other than that I don’t think it will change the situation for most people.
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