Norway faces decline in oil and gas output as nations shift from fossil fuels

Norway must prepare for a decline in its dominant oil and gas industry in the coming decades as other nations start to free themselves from petroleum dependence, according to the International Energy Agency IEA in a new report.

Western Europe's largest oil and gas producer pumps more than four million barrels of oil equivalent per day, but longer term output is set to decline as the Norwegian continental shelf is considered a mature petroleum basin and global demand shifts away from fossil fuels.

The Paris-based IEA released a report on Norway's energy policy on Wednesday, stating that the level of future investment in Norway's oil fields remains unaffected beyond 2025.

Norway is ideally placed for the energy transition but there is still much work to meet its ambitious targets to reduce greenhouse gas emissions by 90 -- 95% from 1990 levels by the year 2050, according to the agency.

Renewables account for 98% of Norway's power generation and 50% of total final consumption, and the country has the highest electrification share among IEA member countries, meaning that many of the easy wins for reducing emissions are already achieved.

The reductions will be more complex, challenging and costly, notably in transport and industry, the IEA said.

The agency recommended Norway jump-start clean technologies such as hydrogen, green shipping, carbon capture and storage and offshore wind, with the IEA urging the adoption of a regulatory framework for the latter.

A year ago, the IEA called for global investors to stop funding new fossil fuel projects, a move that raised public debate in Norway, where oil and gas is expected to generate around 28% of gross domestic product this year and more than 40% of government income.

Norway is confident that its oil and gas can compete in a declining market, but it should plan for a scenario in which demand falls faster than expected as many countries set targets of net zero emissions by 2050, according to the IEA.