“Gas is normally priced at about 55 per cent of the price of oil. Today, gas is priced higher than oil. This will change in the coming years,” said Helge André Martinsen, Senior Energy Analyst at Norwegian banking giant DNB and a keynote speaker at the Sørlandets Energy Conference in Kristiansand Wednesday.
Martinsen expects the global export capacity of liquid natural gas, LNG, to expand by 40 per cent by 2030. At that point, supply will be greater than demand.
“Within three years, due to oversupply, we believe the price of gas will by more than halved. This is without even considering the potential return of Russian gas to the European market, which we could see after an end to the war in Ukraine,” said Martinsen.
Martinsen argued that Europe is likely to start purchasing Russian gas very soon after a peace agreement is signed.
“Russian gas provides a quick fix for European politicians to improve European competitiveness and counter the decline in the European industry sector,” said Martinsen.
Lower European gas prices will translate to lower European power prices, but also to lower investments in gas. This could spell bad news for Norwegian suppliers to the oil and gas industry.
“Drill baby drill!” has been a slogan for President Trump, while arguing for more fossil fuels and promising to cut subsidies for renewables, including offshore wind.
“Political slogans do not dictate activity levels. Cash flow is the king of activity levels. At DNB, we see quite marginal effects of Trump’s policies for oil production. We believe Trump to be net positive for oil prices since he will remove more oil that he will add. But the jury is still out on this question,” said Martinsen.
Executives from the two largest companies in the GCE NODE cluster pitched in with their takes on the situation – approximately six weeks into the new US presidency.
“The president can say ‘Drill baby drill’ as much as he wants. He cannot regulate the market, the market will regulate itself,” said Eirik Bergsvik, CEO of HMH.
Rune Johnsen, General Manager at NOV Norway, was still concerned that increased political risk could be bad for business.
“Predictability is important for the will to invest. When risk increases, as it does now, the premium will increase as well. Even though our market is larger than the US, what happens in the US is important to us, and discontinuing financial measures to stimulate new activity could have an impact,” said Johnsen.
Polls show that a vast majority of Norwegians do not support Trump’s presidency. Bergsvik finds it unwise to bring politics into the conversation when he is in the US.
“We don’t discuss politics with our American colleagues, but we see more and more of them shaking their heads when addressing new initiatives from The White House,” said Bergsvik.
