Expensive gas from the north: Norway cashes in, Poland is furious
While all of Europe is trying to get away from Russian gas and oil, Norway is stepping in and filling storage facilities – at record prices. No exceptions are made for allies like Poland, either. Those without long-term supply contracts are paying handsomely for Scandinavian gas.
100 days before the start of the heating season, German politicians are already sounding the alarm: the coming winter will be tough. For several weeks now, Russia has been supplying only a fraction of the gas it used to via Nord Stream 1. Currently, no gas at all is flowing through the Russian pipeline due to alleged maintenance work. But thanks to the Norwegians, Germany will most likely not freeze in winter after all.
The situation is different in Poland. Germany’s neighbor said goodbye to Russian gas immediately after the start of the war in Ukraine. The government in Warsaw quickly took measures to secure the gas supply. A pipeline to Scandinavia was already nearing completion – a realistic alternative to Russian gas.
Poland must pay high prices
But now Poland is empty-handed. While the pipeline was completed, the government failed to sign long-term supply contracts. Now Poland has to fill the pipeline with expensive gas from Norway in the short term. This is because the Scandinavians only sell the raw material at the current market price – the price that everyone else also has to pay.
The government in Warsaw is correspondingly outraged: “Are we supposed to pay Norway 110 euros per megawatt hour for gas? Four or five times more than a year ago? That’s sick,” Poland’s Prime Minister Mateusz Morawiecki recently scolded. In the meantime, the price of gas is much higher. The fact that Poland has not yet reached an agreement with Norway on long-term contracts for the Baltic Pipe also surprises energy expert Malte Küper. After all, planning and construction of the pipeline had been in full swing for several years, he says in an interview with ntv.de. The fact that it is now more expensive in the short term to buy the volumes on the European spot market EEX is a normal process that reflects the current shortage on the markets.
Germany could also feel the bill. Norway is now Germany’s largest gas supplier. Around 1300 gigawatt hours of natural gas are supplied daily via the two Europipe pipelines. But the situation in Poland is not comparable to that in Germany, says Küper. That’s because Germany has had long-term supply contracts with Norway for years. “Import contracts have been concluded for 20 years or more in some cases to give both producers and buyers security. These prices are much more stable than on the spot markets,” says the consultant for energy at the Institute of the German Economy (IW) in Cologne.
However, this does not apply to the additional supply volumes that have had to be procured on the spot markets in recent months to replace Russian gas. In the meantime, a megawatt hour costs more than 200 euros.
Norway makes record profit
Not bad for Norway’s cash register. Bad for Poland and Germany. The Norwegian Energy Ministry gives legal reasons for the high prices: “Gas producers in Norway are obliged to sell the fuel on market terms. Whether and how much gas flows from Norway depends on economic and market conditions,” Margrete Løbben Hanssen of the Norwegian Energy Ministry told the Polish edition of “Newsweek.” Norway will not cut supplies to other customers and give preferential treatment to Poland, she added. Additional price discounts for the country are also not an option, she said.
The Scandinavian country lives largely on its gas and oil production. Gas and oil account for 14 percent of Norway’s GDP and a whopping 40 percent of exports. And that is likely to reach record levels this year: Already in March, oil and gas exports climbed to record highs totaling 13.7 billion euros in just one month.
The future lies in the sovereign wealth fund
The Norwegians are using this money to secure their future. The Norwegian sovereign wealth fund is world-renowned and considered a best practice example of oil and gas states investing their current wealth for future generations. Revenues from the natural resources sector are invested in this fund – it holds stakes in more than 9300 companies worldwide. As of mid-2021, the fund was worth 12.3 trillion Norwegian kroner (1.7 trillion euros).
Is there anything in this world that doesn’t make Poland furious?
Should have signed a long term contract, can’t blame Norway for accounting for market prices.
Norwegians should get ready for this. Poland won’t be the last country asking for handouts.
In diplomacy the first thing to do is not to get furious, and try to find a solution.
None of the oil and gas fields in Norway is directly run by the Norwegian government. They’re all managed by commercial companies like f.ex Equinor, where yes, the Norwegian government has a controlling interest, but a controlling shareholder can’t necessarily dictate that a company should.a make less money to the detriment of other private shareholders. The solution to high gas prices right now, is to negotiate long term contracts with these commercial companies, with more favourable terms than buying on the spot market.
For context: South Norway has the second most expensive electricity price in Europe today. Are we the villains? I do not think so, people in Norway are suffering insane electricity prices too. Nobody is winning in this crisis.
Not surprised. Probably nobody wanted to sign long term contract before pipeline is finished and gas price was fluctuating and now due high gas prices Norway is expecting more in long term contract.
I don’t see why everyone gets mad at Norway to be honest.
Why should they sell their gas under Market value? I don’t see the incentive for them
Let’s be happy they’re selling us gas at all
How else can they stay rich? Oil and producing military weapons under US license.
Let me tell you guys, Norway is behind everything 😎🇳🇴
I understand market regulating prices is important. But there is unprecedented crisis in Europe right now thats not of our making and west should work together to find crisis resolution. Companies can/should pause their profits until the spring. Otherwise millions of europeans will freeze or go bancrupt.
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Expensive gas from the north: Norway cashes in, Poland is furious
While all of Europe is trying to get away from Russian gas and oil, Norway is stepping in and filling storage facilities – at record prices. No exceptions are made for allies like Poland, either. Those without long-term supply contracts are paying handsomely for Scandinavian gas.
100 days before the start of the heating season, German politicians are already sounding the alarm: the coming winter will be tough. For several weeks now, Russia has been supplying only a fraction of the gas it used to via Nord Stream 1. Currently, no gas at all is flowing through the Russian pipeline due to alleged maintenance work. But thanks to the Norwegians, Germany will most likely not freeze in winter after all.
The situation is different in Poland. Germany’s neighbor said goodbye to Russian gas immediately after the start of the war in Ukraine. The government in Warsaw quickly took measures to secure the gas supply. A pipeline to Scandinavia was already nearing completion – a realistic alternative to Russian gas.
Poland must pay high prices
But now Poland is empty-handed. While the pipeline was completed, the government failed to sign long-term supply contracts. Now Poland has to fill the pipeline with expensive gas from Norway in the short term. This is because the Scandinavians only sell the raw material at the current market price – the price that everyone else also has to pay.
The government in Warsaw is correspondingly outraged: “Are we supposed to pay Norway 110 euros per megawatt hour for gas? Four or five times more than a year ago? That’s sick,” Poland’s Prime Minister Mateusz Morawiecki recently scolded. In the meantime, the price of gas is much higher. The fact that Poland has not yet reached an agreement with Norway on long-term contracts for the Baltic Pipe also surprises energy expert Malte Küper. After all, planning and construction of the pipeline had been in full swing for several years, he says in an interview with ntv.de. The fact that it is now more expensive in the short term to buy the volumes on the European spot market EEX is a normal process that reflects the current shortage on the markets.
Germany could also feel the bill. Norway is now Germany’s largest gas supplier. Around 1300 gigawatt hours of natural gas are supplied daily via the two Europipe pipelines. But the situation in Poland is not comparable to that in Germany, says Küper. That’s because Germany has had long-term supply contracts with Norway for years. “Import contracts have been concluded for 20 years or more in some cases to give both producers and buyers security. These prices are much more stable than on the spot markets,” says the consultant for energy at the Institute of the German Economy (IW) in Cologne.
However, this does not apply to the additional supply volumes that have had to be procured on the spot markets in recent months to replace Russian gas. In the meantime, a megawatt hour costs more than 200 euros.
Norway makes record profit
Not bad for Norway’s cash register. Bad for Poland and Germany. The Norwegian Energy Ministry gives legal reasons for the high prices: “Gas producers in Norway are obliged to sell the fuel on market terms. Whether and how much gas flows from Norway depends on economic and market conditions,” Margrete Løbben Hanssen of the Norwegian Energy Ministry told the Polish edition of “Newsweek.” Norway will not cut supplies to other customers and give preferential treatment to Poland, she added. Additional price discounts for the country are also not an option, she said.
The Scandinavian country lives largely on its gas and oil production. Gas and oil account for 14 percent of Norway’s GDP and a whopping 40 percent of exports. And that is likely to reach record levels this year: Already in March, oil and gas exports climbed to record highs totaling 13.7 billion euros in just one month.
The future lies in the sovereign wealth fund
The Norwegians are using this money to secure their future. The Norwegian sovereign wealth fund is world-renowned and considered a best practice example of oil and gas states investing their current wealth for future generations. Revenues from the natural resources sector are invested in this fund – it holds stakes in more than 9300 companies worldwide. As of mid-2021, the fund was worth 12.3 trillion Norwegian kroner (1.7 trillion euros).
Is there anything in this world that doesn’t make Poland furious?
Should have signed a long term contract, can’t blame Norway for accounting for market prices.
Norwegians should get ready for this. Poland won’t be the last country asking for handouts.
In diplomacy the first thing to do is not to get furious, and try to find a solution.
None of the oil and gas fields in Norway is directly run by the Norwegian government. They’re all managed by commercial companies like f.ex Equinor, where yes, the Norwegian government has a controlling interest, but a controlling shareholder can’t necessarily dictate that a company should.a make less money to the detriment of other private shareholders. The solution to high gas prices right now, is to negotiate long term contracts with these commercial companies, with more favourable terms than buying on the spot market.
For context: South Norway has the second most expensive electricity price in Europe today. Are we the villains? I do not think so, people in Norway are suffering insane electricity prices too. Nobody is winning in this crisis.
Not surprised. Probably nobody wanted to sign long term contract before pipeline is finished and gas price was fluctuating and now due high gas prices Norway is expecting more in long term contract.
I don’t see why everyone gets mad at Norway to be honest.
Why should they sell their gas under Market value? I don’t see the incentive for them
Let’s be happy they’re selling us gas at all
How else can they stay rich? Oil and producing military weapons under US license.
Let me tell you guys, Norway is behind everything 😎🇳🇴
I understand market regulating prices is important. But there is unprecedented crisis in Europe right now thats not of our making and west should work together to find crisis resolution. Companies can/should pause their profits until the spring. Otherwise millions of europeans will freeze or go bancrupt.