Stricter global climate policies could influence Norway’s oil and gas industry and lead to a phase out of oil and gas sooner than previously expected, Oystein Olsen, the Governor of Norway’s central bank Norges Bank, said on Thursday.

“We are facing a climate crisis that can only be addressed by engaging in a common global effort,” Olsen said in an address to the Supervisory Council of Norges Bank and invited guests.

Demand for fossil fuels is set to decline as consumption patterns shift and production methods move towards lower emissions, the governor of the central bank said.

“This can influence oil and gas activities in Norway. We have always known that oil and gas activities will be phased out sooner or later. Oil and gas are non-renewable resources. A stricter global climate policy may mean that this will occur sooner than foreseen earlier,” he noted.

Yet, there is still demand for oil and gas in the world, and Norway’s oil and gas sector will remain profitable “for quite some time,” Olsen said, noting that reducing production offshore Norway earlier than planned would only help other oil suppliers to fill in the gap.

“The climate impact of an earlier reduction would therefore be marginal, while the costs to Norway would be substantial,” Olsen said.

The oil industry has been an economic engine in Norway for nearly 50 years and “more than 10 percent of all employed persons in Norway are either directly or indirectly working for the oil industry,” the governor said.

Norway’s oil production fell in 2018 compared to 2017 and is further expected to drop this year to its lowest level since 1988.

Thanks to the start up in late 2019 of Johan Sverdrup—the North Sea giant, as operator Equinor calls it, oil production is expected to jump in 2020 through 2023. But after Johan Sverdrup and after Johan Castberg in the Barents Sea scheduled for first oil in 2022, Norway doesn’t have major oil discoveries and projects to sustain its oil production level after the middle of the 2020s.

By Tsvetana Paraskova for Oilprice.com

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