September 26, 2021

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- We have to think a lot, much bigger - E24

– We have to think a lot, much bigger – E24

Norway must invest NOK 100 billion annually in offshore wind until 2030, to replace oil and gas exports with electricity exports. That’s what SEB’s chief raw materials analyst, Bjarne Schieldrop, suggested.

Offshore wind turbines from Danish Vestas on the Nordic project in Belgium.

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Schilddrop offers his thoughts on to install At the Energy Valley industrial group in Arendalsuka on Monday night.

Norway’s chief political analyst encourages thinking more and seizing opportunities to create jobs and export revenue from offshore wind.

“We have a wonderful, golden opportunity to be bold and build the North Sea again,” says Schieldrop.

100 billion a year

Bjarne Schieldrop is SEB’s Senior Raw Materials Analyst.

He notes that the Norwegian oil and gas industry’s exports will eventually decline dramatically, and estimates that employment could decline rapidly by 50 percent by 2035.

Over the same period, the European Union and the United Kingdom will need massive amounts of renewable energy to phase out their use of fossil energy.

Schildrup thinks Norway could provide some of this through large-scale development of offshore wind. The state is asked to step in with a huge investment in infrastructure, especially offshore floating winds.

– The country should be willing to put NOK 100 billion on the table every year until 2030, in order to speed things up properly. So we can really get the scale needed here, he says.

Schieldrop calls for a total investment of nearly NOK 1,000 billion in floating offshore winds in particular, but also to purify hydrogen and carbon dioxide, up to 2030.

This corresponds to about eight percent of the oil fund, which today is worth 12,000 billion Norwegian kroner.

– Cables should be built for the continent, and Norway should enter into a dialogue with politicians in Brussels, Germany and France, and say we can offer that. Both because the European Union needs it, says Schildrup, but also because Norway needs it as an heir to its oil and gas sector on its way to sunset.

This is how investments on the Norwegian shelf could develop given the significant investment in offshore wind, among other things, according to SEB’s Bjarne Schieldrop.

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1000 TWh will be exported

Schildrup thinks Norway should aim to export 1,000 TWh of offshore wind energy annually from Norway to the EU.

This is 100 times more than would be expected with today’s plans, and about seven times the Norwegian energy production today, about 150 TWh.

We have to think a lot more about what Norway can do, says Schildrup.

We should aim at at least building something similar to the oil and gas sector today, with an efficient export of 1,000 TWh per year. So far, the plan is to produce about 10 TWh of offshore wind in 2030. We have to think hundreds of times, he says.

Several parties in the Norwegian parliament also want to develop offshore wind energy on a large scale. Among other things, the Millennium Development Goals called for building a capacity of 100 TWh, and that Norway should spend 30 billion annually on offshore wind.

This is how SEB’s chief commodities analyst Bjarne Schieldrop envisions the state’s cash flow could develop, given the significant investment in offshore wind. While there would be less money from oil and gas, he believes hydrogen and offshore wind could ultimately contribute a lot of revenue to the state.

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A tidal wave of money

The EU’s energy supply in 2019 was about 3,200 TWh, of which about 40 percent was fossil energy supply.

To cut all fossil fuel uses, the EU and UK need an additional 7,000 TWh of renewable production capacity by 2050, Scheldrop estimates.

To develop a significant amount of renewable energy, they have to spend between 200 and 300 billion euros annually. At least, he says.

We’re talking about a tidal wave of money to be used to build new green energy, huge amounts to be invested in renewable energy, and it has to go fast. Part of the problem is that the technological revolution that normally takes 90 years will now happen in 30 years. So we are going through a bad time. He says the climate doesn’t give us 90 years to do that.

note! A SEB analyst estimates that Norway’s oil and gas exports correspond to roughly 1,000 TWh in electricity exports. The amount of energy is about 2,400 TWh, but the shielddrop is tuned so that using oil and gas is less efficient than electricity.

SEB’s Bjarne Schieldrop believes that investing in offshore winds floating particularly on the Norwegian continental shelf can provide significant jobs, counteracting the impact of lower oil and gas employment. FOW stands for floating offshore wind, while green and blue hydrogen are produced from renewable energy and natural gas, respectively.

It can provide great job opportunities

Schildrup points out that Norway has everything it needs to have offshore wind resources, money and offshore technical expertise to deliver much more offshore wind energy than has been planned so far.

If we set ourselves an ambition to produce 50 or 100 TWh per year with offshore wind, that would be pissing in the sea for the 7,000 TWh that the EU needs by 2050, he says.

Even with the massive investment in offshore wind, it is estimated that the state’s revenue from the Norwegian continental shelf will drop significantly from about NOK 500 billion in 2026 to NOK 200 billion in 2040, before revenues rise towards 2060 (see figure).

– Then we will have a dark valley when it comes to oil revenues, even if we put all the clothes in it. But he says such investment can provide significant employment opportunities.

Until 2060, floating offshore winds, hydrogen production from gas and renewables could contribute significant amounts of energy to Europe, counteracting the decline in Norwegian oil and gas production, SEB’s Bjarne Schieldrop believes. However, this presupposes a large investment in offshore wind, he believes.

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Red rose picture, but the views are bleak

Scheldrop’s proposal comes on the heels of a dismal report from the UN Climate Panel and the International Energy Agency report earlier this year that cast doubt on the need for new oil and gas developments after 2021 if the global transition is to be successful.

With today’s prices, it looks bright for the Norwegian oil and gas industry. But Schieldrop thinks the outlook will turn bleak from around 2026, even in the positive scenario where production develops according to the forecasts of the Ministry of Petroleum and Energy and the price of oil remains at $60 a barrel.

At the moment we live in an oil and gas bubble where everything is pink. Production is rising and prices are high. Then he says this turns violent in 2026.

– Then suddenly there are no more developments, production begins to decline, and according to Rystad forecast from April of this year Then global consumption will also decline after 2026 with lower oil and gas prices as a result. He then starts blowing headwinds from all sides, Schildrup says.

He notes that if the IEA’s zero-emissions scenario materializes, it will also lead to lower oil prices. This scenario estimates the price of oil at $35 a barrel already in 2030, and just $24 in 2050.

There will be less production, lower prices, less activity, and a 50 percent decline in employment. Here, Schildrup says, Norway should consider alternatives.

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