Norway’s Arctic ambitions face reality check

Norway is stepping up gas exploration in its Arctic waters to account for reduced supply to Europe from Russia and the Middle East. The plan could come at a hefty financial and environmental cost – and many of the fields may come online over a decade from now, when the market and political realities are likely to be very different.

While the Scandinavian country is already Europe’s largest supplier of pipeline gas, it would need to make more discoveries if it wants to keep up production in the longer term. It produced about 122 Bcm of gas in 2025, of which most was exported to Europe. Production is expected to increase slightly in 2026, according to statistics from the Norwegian Offshore Directorate.

Unless new discoveries are made, however, gas production is expected to gradually decline in the coming years. To this end, the Norwegian government has set its eyes on increased exploration in remote northern areas which encompass the Barents Sea and the Norwegian Sea.

The push coincides with a phase-out in Russian gas and the volatile geopolitical situation in the Middle East, which could keep gas prices elevated for the foreseeable future.

Snorre Erichsen Skjevrak, State Secretary in the Norwegian Ministry of Energy, told Gas Outlook that the resource potential in the Norwegian part of the Barents Sea is large.

“That is why the government wants more activity and exploration in the Barents Sea. And that is why we have included new blocks in the Barents Sea in the licensing round APA 2026. It is positive that there has been large interest from industry in the licensing round,” he said. “Production licenses will be awarded in January [2027].”

Drilling will not come cheaply

In late August, Equinor, Aker BP and Vår Energi (in which ENI has about a 63% stake) announced that they are establishing a “strategic exploration collaboration” to pursue some of the largest remaining opportunities on the Norwegian continental shelf.

The companies noted that, in recent years, most discoveries had been made close to existing infrastructure, but that some of the largest remaining opportunities come with higher geological uncertainty, greater complexity and larger investment requirements.

Elaborating on this point, Lars Sørum, Research Director at independent research organisation Sintef in Trondheim, Norway, told Gas Outlook that the discovery of oil and gas on the Norwegian continental shelf in recent years has been characterised by small discoveries and challenging reservoirs – tight and with high pressure and temperature.

“For these small and challenging reservoirs, drilling cost has to go down in order to make it more cost efficient to develop these findings. A single well can have a cost upwards to NOK 1 billion (~USD 106m),” he said.

Less government funding for scientific research is also an issue.

“We are developing new technologies in order to achieve well solutions that are less costly, but in recent years financial support from the Norwegian government on petroleum research has decreased towards a level that is eroding the scientific community and it might even disappear in the near future,” said Sørum. “As the security of supply is of increasing concern, especially piped natural gas to Europe, we are hoping that the current situation will change.”

Missing infrastructure 

Bringing the gas to the market is also a challenge. Norway has one LNG export terminal in the Barents Sea, the 6.5 Bcm/year Hammerfest LNG terminal, but bringing additional Arctic gas volumes to shore would require new infrastructure. A new USD 5.7bn gas pipeline in the Barents Sea, which would transport gas from the Barents Sea to the main Norwegian pipeline network, has been talked about for years but investors seem reluctant to commit to the project.

“Any increased gas production from the Barents Sea will require a new export solution, whereby a new gas pipeline is the most likely solution,” Emil Varre Sandøy, Vice President at Rystad Energy, told Gas Outlook.

It would take 5 to 10 years after approval for the pipeline to be operational, with new fields being developed simultaneously, Sandøy said.

“However the project has been stuck for several years as there’s currently not enough discovered gas volumes to justify building a new pipeline. And there’s little incentive for the companies to explore for more gas as long as there’s no available export solution,” he said. “In addition, the gas volumes already discovered are spread out across large distances, so it will be costly to develop a lot of them even with a pipeline.”

The situation could change if significant discoveries are made, if there are technological breakthroughs that unlock difficult gas reservoirs in existing discoveries, or if the government decides to build the pipeline itself to incentivise new exploration and project development, Sandøy added.

“Under this scenario, and with a new pipeline, there is potential to get new gas volumes from the Barents Sea in the mid- to late-2030s.”

Sensitive areas

Other parts of the Norwegian Arctic can be developed more rapidly, but there are environmental concerns to consider.

For the Northern part of the Norwegian Sea, there is the existing Aasta Hansteen hub and the connected Polarled pipeline to the Nyhamna processing plant, both with available capacity. Depending on the exact location, characteristics and size, any new discovery could be developed relatively quickly, although after 2030, said Sandøy.

Also in the Norwegian Sea, a recent report released by Norwegian trade and business associations recommended re-opening parts of the Nordland VI area for oil and gas exploration and this has stirred a hefty debate. The areas are located offshore Lofoten, Vesterålen and Senja and are home to cold-water corals and a rich bird- and sea-life. The areas have been closed to drilling since 2001.

Whether the government will unpause restrictions on drilling in Nordland VI remains an open question. The government plans to release a White Paper on its petroleum sector in January 2027 that is expected to shed further light on this issue.

“The goal is to secure continued high activity, high resource utilisation and a stable framework for the industry,” said Skjevrak. “Which parts of our resource base the government wants to utilise will be a topic in the paper.”

Ultimately, Norway’s biggest buyer of gas, the EU, may not even be interested in more gas produced in the Arctic.

In the 2021 Joint Communication on the EU Arctic policy, the EU says it is committed to ensuring that oil, coal and gas stay in the ground, including in Arctic regions. An important consideration in this regard is the specific difficulty, due to the prevailing weather conditions, for response and clean-up, in case of industrial or maritime accidents, the communication says.

The joint communication says the Europe Commission will work with partners towards a multilateral legal obligation to not allow any further hydrocarbon development in the Arctic and to not purchase such hydrocarbons if they were to be produced.

“The EU remains committed to the approach set out in the 2021 Joint Communication on the EU Arctic policy,” said a spokesperson from the European Commission on condition of anonymity.

“When it comes to the details of the EU Arctic Strategy, the process is ongoing. The communication is expected to be adopted in the autumn.”