Speech at International Energy Forum, Riyadh

International Energy Forum, Riyadh,14 April 2012
Minister of Petroleum and Energy Ola Borten Moe

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• Excellencies, ladies and gentlemen,

 

•  I’m pleased to be here with the International Secretariat of the International Energy Forum. The IEF plays an important role in better understanding and stabilising the energy market. This is of great importance to all of us, be it producers or consumers.

 

• Access to energy is crucial to economic and social development. Stable energy markets are to the benefit of producing as well as consuming countries. After the oil shocks in the 1970s, there was a growing mistrust between oil consuming countries and oil producing countries. Lack of information and understanding leads to uncertainty, price volatility and increase the cost of investments in the energy sector.

 

• A good dialogue and understanding between the key oil producing countries and consuming nations can reduce this risk. Norway has for years – and from the very beginning in 1991 – strongly supported a better global energy dialogue.

 

• The International Energy Forum has for more than two decades genuinely been trying to improve the dialogue between producers and consumers. From the Norwegian side we are very pleased with the achievements that have been made by the IEF.

 

 

• I am also glad to be here in Saudi-Arabia.

 

• It’s obvious that there are many differences between our two countries in geography, economy and policy. But there are also similarities.

 

• We have both been blessed with abundant hydrocarbon resources. Petroleum has become important to our national economy and the welfare of our people.  

 

• In many respects Saudi Arabia is a giant compared to Norway. The size of your country is more than 6 times the size of Norway. But like in Norway only a minor part is arable. The population is more than fivefold the Norwegian, and the population is much younger (median age 25.7 vs 40.3 in Norway).

 

• In the petroleum sector, Saudi Arabia is the giant with the world’s biggest proven oil reserves (19 percent) and biggest oil production and export.

 

• Being such a sizeable oil producer and exporter, let me take the opportunity to express my recognition of the role Saudi Arabia plays in the stabilizing of the market, by holding spare capacity and balance the market when needed.

 

• Norway holds less than 0,5 percent of proven oil reserves and produces about one fifth of the Saudi oil production. On natural gas we produce about the same, but the differences in proven reserves are about the same as for oil.

 

• In the following, I would like to elaborate a little bit more on the Norwegian model and Norway’s role on the global energy scene.

 

 

• Let me start by saying some words about the challenges we are facing in the energy arena.  Access to energy is crucial to economic and social development.  There is no doubt that the need for energy means a substantial increase in demand for energy.

 

• According to all IEA scenarios, the need for energy will increase dramatically towards 2035. Even within the 2 degrees scenario, most of the energy used will come from fossil fuels.

 

• To supply the market with enough energy is not an easy task.  Today, energy consumption is 80 percent based on fossil fuel. One third of this is coal. In the future we need to be less “carbon addicted” and also develop an economically sound technology for Carbon Capture and Storage (CCS).

 

• We have to work in parallel; we need technology development, more efficient use and production of energy, transformation to less carbon intensity.  Both oil and gas is less carbon intense than coal. Gas is a good substitute to coal in the power generation.

 

• This, I think, is one of the most important lessons to be learned from the United States today: To substitute coal with gas, making them able to reduce their energy costs and thereby increase their ability to compete. At the same time, they are reducing their emissions faster than any other economy world wide. This is something that the European Union could learn from.

 

• Stable oil and gas markets are import to producers and consumers. Regulation, information, data and dialogue are all important factors in minimizing huge price fluctuation. OPEC plays an important role in stabilizing the market. It does not that mean oil and gas prices will not change. They will, and should react to fundamental changes taking place in the international energy markets.

 

• Lately, we have seen large changes in the international energy markets, due to what we can call an energy revolution in the USA.

 

• Production of unconventional oil resources and shale gas, implies that the American dream of energy self sufficiency could be within reach in the future.

 

• It’s too early to conclude what will be the implication on the global oil and gas market of the tight oil and gas revolution. I think that bringing new resources to the market is crucial in order to maintain transparent markets, to keep security of supply and to show the markets that oil and as will still be around.

 

• On the regional level, the implications of US oil and gas are substantial. As mentioned, by shifting from coal to gas US emissions are down. When it comes to the US economy this has a huge effect both by reducing the trade deficit and by creating new jobs  and new activity with the US economy.

 

• The American energy revolution obviously also has consequences for a gas exporting country such as Norway. The Snøhvit LNG plant was originally constructed to produce gas to the American market. When the facility finally was finished, the American market was gone, and LNG from Snøhvit is now exported elsewhere, mainly Asia.

 

 

• The Norwegian petroleum resources were first discovered in the late 1960s, actually on the day before Christmas Eve in 1969. It is fair to say that we have seen an incredible development since then.
  
  
• Norway is the seventh largest and the 14^th largest oil producer in the world. We are the third largest gas exporter and the sixth largest gas producer according to figures from 2011.

 

• Although small compared to Saudi Arabia, Norway is a substantial producer of oil and gas – ranking as the 7^th largest oil exporter and number 14 among the oil producing countries. We are the 3^rd largest gas exporter, and the world’s 6^th largest gas producer (according to figures from 2011).

 

• When the petroleum resources were discovered on the Norwegian continental shelf in the late 60s, we decided to invite the international oil companies to take a lead in the first phase of our oil and gas activities.

 

• It is important to note that the Norwegian petroleum adventure would not have been possible without the presence of foreign oil companies. At the time, Norway possessed no national expertise as a host nation for oil and gas. Attracting international oil companies was both a necessary and successful strategy. We had the oil and gas resources under the seabed.  The international companies contributed with their skills and knowledge, and capital, in order to discover fields and to develop and produce them.

 

• This provided results. Production and activity increased. State income increased. Norwegian oil companies, as well as a supply and a knowledge industry were created.

 

• We succeeded in developing the national company Statoil, which has now truly become an international company with activities all over the world.

 

• Currently, 76 fields are in production on the Norwegian continental shelf. Last year, these fields produced about 1.9 million barrels of oil (including NGL and condensate) per day, and about 111 billion standard cubic metres (Sm3) of gas. This gives Norway a production totalling 225 million cubic meters of oil equivalents.

 

• The Norwegian Petroleum Directorate’s base estimates for discovered and undiscovered petroleum resources on the Norwegian continental shelf amount to approximately 13.6 billion standard cubic metres of oil equivalents. Of this, 44 per cent – less than half - have been sold and delivered.

 

• There is therefore still substantial resource potential left on the Norwegian Continental Shelf. The Shelf is large, more than 3,5 times the size of the Norwegian landmass. Large parts of it has yet not been opened up for petroleum activities, and we are now in the process of opening up some more acreage – in the south-eastern parts of the Barents Sea which include the former disputed area between Norway and Russia.

 

• Norway will be a major producer and exporter of petroleum in the foreseeable future. We have seen a decrease in the Norwegian oil production lately. This has been substituted by an increase in the Norwegian gas production. We expect this development to continue.  

 

• The government is working hard to maintain a high activity level on the Norwegian continental shelf.

 

• In 2011, the government put forward an updated strategy for the petroleum sector in a White Paper with the title: “An industry for the future”. The White Paper received support from all political parties in the Parliament.

 

• The White Paper points out that a high production from our shelf – also in the future – is very much achievable. We put forward a parallel and active commitment to:

 

• increase the recovery rate in existing fields;
• to develop all commercial discoveries;
• to continue to explore;
• and to open new areas.

 

• The petroleum industry’s research and technology projects are major contributions to long-term knowledge development and competitiveness within the Norwegian petroleum sector. The public research and development effort plays an important role in triggering research and technology development that would otherwise not have been carried out.

 

• An important example of the value of continued research and development is how increased oil recovery is creating value and extending lifetimes of fields on the Norwegian Continental Shelf. I am proud of the Norwegian track record here.

 

• On average, fields on the Norwegian Continental Shelf have increased their oil reserves by a factor of around 1,7 from the original development plans and up to today. Our average oil recovery rate is high compared to other oil provinces. But we aim to do even better.

 

• Statoil is already a world leader in increased oil recovery with 50%. The ambition is to achieve an average recovery rate of 60% from the fields operated by Statoil on the Norwegian continental shelf. For every percent we increase the percentage , we create values equivalent to 60-70 billion dollars. So ths is important to the Norwegian society.

 

 

• The last years, we have seen a very high activity level on the Norwegian Continental Shelf. We have also seen very good exploration results – particularly in 2011.

 

• Our biggest discovery – Johan Sverdrup – holds resources estimated at between 1,2 and 2,5 billion barrels of oil equivalents. It was the largest offshore discovery globally that year. It was explored in the most mature part on the Norwegian Continental Shelf. It was part of the first licence in 1965, and we have been shooting seismic and drilled this area for almost 50 years. And in 2005 it was finally discovered.

 

• A French company was only a few meters from finding 3,2 billion barrels of oil in the mid 80s. It turned out to be som very expensive few meters, not to complete the well. But it also tells us that you never know with geology. We learn more, we discover more and it tells us that even in mature areas Mother Earth can hold secrets. It is up  to us to unveil them, and to discover and produce the resources.

 

• In addition to this, the Skrugard discovery in the Barents Sea was the third biggest. The current estimate of Skrugard is 400 to 500 million barrels. This is a breakthrough in this area and opens up a new oil province in the Barents sea.

 

• The delimitation agreement reached with Russia in 2010 has opened up new areas for exploration in the southeastern part of the Barents Sea. This underlines the importance of the High North in an energy context.

 

• In sum, developments the last couple of years indicate that Norway will continue to be a significant oil and gas producer for decades ahead.
  
   
• Access to new acreage is important for the petroleum industry. The Government is now working to open new areas for petroleum activity.

 

• The yellowish areas shown in the map are currently under review. The red areas on the map are presently not yet opened for petroleum activity. As you can see they are in the High North.
  
  
• We have a thorough process before opening, we have to make an impact assessment and resource estimation and the results of these have to be publicly available for comment. The final decision is made by the Norwegian Parliament.
  
  
• In the yellowish areas opening processes are ongoing. They cover the areas around Jan Mayen and the new areas in south-eastern part of the Barents Sea – this is the Norwegian part of the formerly disputed area with Russia.
  
  
• The aim is for the government to take a decision on the south-eastern part of the Barents Sea before the summer, to put a plan forward to the Parliament and hopefully to make Parliament to open the areas. On Jan Mayen, we need some more time before a decision can be taken.

 

• 40 years with challenges at the Norwegian Continental Shelf has created an innovative petroleum industry. The Norwegian petroleum industry has world class technology and expertise and is successful in all major petroleum provinces.

 

• Fields on the Norwegian Continental Shelf have often been in deep waters, or located in remote areas with no infrastructure in place. Technological development has been necessary to make fields economically viable, or possible to develop at all.

 

• Thanks to this work, Norwegian industry has developed cutting edge technology: Subsea production systems, subsea compression, and multiphase flow over long distances and in deep waters are some examples.

 

• Fairly recent technological advances made the development of Snøhvit and Ormen Lange possible. The Snøhvit gas field in the Barents Sea was discovered in 1984 and the field would not have been economically viable without a subsea solution and multiphase flow.

 

• Another technology step forward is the Åsgard subsea compression project.

 

• The closer the compression is to the well, the higher the efficiency and production rates become. Other fields on the Norwegian continental shelf are planning technology tests and qualifications similar to those practised on Åsgard.

 

• The engagement and interaction between oil companies, industry and research institutions have been fundamental in finding solutions to technological challenges. I am truly proud of the way these players have collaborated and are bringing world class technology and technological solutions to the market.

 

• This is also reflected in the international success of Norwegian companies.  We see that the Norwegian subsea industry is expanding on the global market, exporting to countries like the USA, Russia and Brazil. This further strengthens Norway’s leading role in subsea technology.

 

• Let me say some words about Carbon Capture and Storage, an area where Norway is a front-runner internationally.

 

• As the IEA points out, the world will have large difficulties with reaching the climate targets unless CCS is widely deployed.

 

• In Europe, I am afraid that it seems like carbon capture and storage has lost some of its initial momentum. We have learned how projects of this scale and magnitude are more complex and frankly much more expensive than originally envisaged.

 

• However, challenges are to be met and I firmly believe that carbon capture and storage will be a crucial part of the solution to the climate change challenge. And we are strongly committed to further develop and contribute to a widespread deployment and dissemination of carbon capture and storage technologies.

 

• In Norway, the Technology Centre Mongstad was opened in 2012.  It is the world’s most advanced test centre for carbon capture.

 

• To sum up: The world needs more, cleaner and secure energy. Norway will do our share to deliver that.

 

• By a parallel and active commitment to both increased recovery rate, development of discoveries, exploration and new acreage, Norway will deliver stable production of oil and gas for decades to come.

 

• We will make production and consumption of oil and gas ever more environmentally friendly, and our work on developing CCS technology is a crucial part of this effort.

 

• Thank you for your attention!

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