European Gas Conference

Minister of Petroleum and Energy Terje Søviknes gave the opening speech at the 19th European Gas Conference in Oslo on 29 May 2018.

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Good afternoon and thank you for the invitation to the European Gas Conference! It is a pleasure to be here in such great company and start off two days of interesting presentations and discussions on gas.

I am very happy that we can gather so many bright minds at this conference in Oslo to discuss the role of natural gas as we see it now and in the future. 

Gas was once a second prize to oil but is now a premium commodity providing almost one-quarter of the world's energy needs.

Norway has a long and successful history as a producer and exporter of natural gas. In fact, last year we celebrated the 40th anniversary of the first export of natural gas from Norway which started with gas from the Ekofisk field in the North Sea through Norpipe to the terminal in Emden in Germany.

Since 1977, Norwegian gas has heated many houses and helped prepare many dinners!

Last year Norway exported a volume of gas which could cover the gas needs of an average British home for 112 million years

Natural gas is always a topic of conversation when I go abroad in my capacity as Minister of Petroleum and Energy. And rightly so!

I want to take this opportunity to outline why I believe natural gas in general and Norwegian gas in particular has a key role to play in the global and European energy mix also for decades to come.

In short: natural gas is  flexible and reliable, it is available in abundance and it can drive large emission cuts when gas replaces coal.

Energy demand

First, let us have a look at the bigger picture. The world demands energy, and lots of it.

The global population is growing. More and more people enjoy a higher standard of living. This requires affordable energy.

At the same time greenhouse gas emissions need to be reduced in order to achieve the targets set in the Paris climate agreement. This is no simple task.

Renewable sources such as wind and solar power are growing rapidly on a global level. This is a very good thing. We should however keep in mind that this growth comes from a very low level. The world needs a variety of energy sources to meet demand.

In all of the main scenarios, the IEA expects the consumption of natural gas to grow. Surely, no one can say exactly what the future holds, but based on the analyses of the IEA, it is safe to say that the future is bright for gas.

Coal to gas – a cheap and easy way to reduce emissions

There is no one solution to our climate change challenge and we need to approach the challenge with a range of different measures. However, some solutions are more obvious than others.

About one third of global energy demand is currently met by coal.

In the EU about 70 per cent of the emissions from electricity production come from coal while coal provides less than 25 per cent of the electricity generated.

One fast and cheap way to reduce emissions is to replace coal with gas as natural gas emits up to 50 per cent less CO2 than coal. This would really make an impact!

The UK, the US and China have all achieved large CO2 emission cuts by replacing substantial amounts of coal with gas. It works!

Natural gas – a flexible fuel and partner to renewables

Consumers can rely on gas being available when they need it. With extensive infrastructure in place, gas flows to where it is demanded.

The flexibility of natural gas is important for European energy supply.

This is in contrast to intermittent energy sources. As I have mentioned, renewable energy is growing globally. A lot of new renewable power, primarily wind and solar, is being developed in the European Union.

This does pose a few challenges for the energy system.

To put it simply, the production of wind and solar depends on the weather in a way that gas does not. You can have a wind power plant producing at full speed during a summer night with little demand, while the turbines can stand completely still on a cold winter day with high demand.

In contrast, natural gas is only delivered when there is demand on the consumer side and can respond to dips and spikes in demand.

While they have different properties, natural gas and renewables fit well together. Given the flexibility of natural gas, it can respond quickly on days when the sun does not shine and there is no wind.

In this way, natural gas facilitates the introduction of more renewables into the power system.

Energy security and import dependency in Europe

Natural gas plays an important role in the energy mix in Europe, and has done so for decades. Several hundred million Europeans depend on gas every day.  

Due to falling production from domestic sources, the tendency is that Europe is increasingly dependent on imports.

From my point of view, this is not a problem for energy security in itself. The important thing is reliable supplies, not self-sufficiency.

European gas consumers have never had more sources of gas supply than they have now.

EU security of supplies has improved as the European gas infrastructure network has been expanded with new LNG facilities, storage capacities and new pipeline interconnections.

The best way to strengthen energy security is to continue efforts to develop well-functioning, well-regulated and competitive markets with diversified supply sources and sufficient infrastructure to move gas around.

I believe in letting the market work as freely as possible. This includes letting the market decide on development of infrastructure projects, too.

Adequate infrastructure is key to energy security. It also provides a range of other benefits: a well-developed infrastructure contributes to the integration of markets, with a diversity of sources and it increases competition to the benefit of the consumer

Furthermore, having the sufficient infrastructure in place will help the integration of intermittent renewable power into the energy system.

As you can see, infrastructure development has many benefits.

In my view, the EU will benefit from multiple access points for gas to Europe. We see several examples of this.

Even though it is not necessary for Norwegian export capacity, a Danish tie-in to the Europipe II and a Baltic Pipe, linking the NCS with Poland and Denmark could add import capacity and diversify supply routes and sources. If built, it will contribute to gas supply security in this part of Europe.

Direct access to the Danish and Polish markets would also offer additional flexibility for companies exporting natural gas from the Norwegian Continental shelf.

Norwegian authorities therefore take a positive view of a commercially based tie-in to Europipe II and a Baltic Pipe, as long as it is compatible with the integrity and functioning of our existing upstream system.

A precondition for gas taking its rightful place – efficient markets

I have already touched upon the importance of well-functioning markets. A central component of that concept is putting a price on emissions.

It is my firm belief that carbon taxation should be the key measure in order to limit the emissions of greenhouse gases. It means that all emission cuts will be made where they can be achieved at the lowest cost, with no preference given to any single technology.

In such an environment, low emission sources will win out and Norwegian gas will be in a strong position.

Norway introduced a high carbon tax on offshore activities in 1991, and since 2008 we have also been a member of the European emissions trading system – the ETS.

Putting a price on emissions works: on average Norwegian petroleum activity has significantly lower emissions than the world average.

Norway as a supplier

Norway is the world's third largest gas exporter and has been  a reliable supplier of gas to Europe for decades and has the resources to continue doing that for decades still.

We have never delivered more gas than we do now.

Last year, we exported 122 bcm of gas. This was a record amount for the third consecutive year in a row!

We have the resources to supply Europe with gas for a long time yet. In fact, after more than 40 years of exports, we have produced only about one third of our estimated gas resources.

Two thirds remain.

The actual level of production in the future will be decided by production from existing fields over time, ongoing and future development activity and results of future exploration.

Yet to find resources will be increasingly important in the longer term. That is why we will continue to lead an active exploration policy.

This Government has made significant new acreage available for exploration by the industry. I am encouraged by the interest shown by the industry to explore areas on the Norwegian shelf.

I am also encouraged by the ability shown by the industry to bring new projects forward, coming on the back of the downturn in the industry.

The Polarled pipeline has opened up for gas production above the Polar circle and will facilitate the further development and exploration of the Norwegian Sea.

When the Aasta Hansteen field in the Norwegian Sea comes on stream later this year, it will be the largest gas field to do so since 2007. Hansteen is crucial in that it opens a new gas region in the Northern Norwegian Sea.

The Dvalin field will further strengthen the Norwegian Sea as a gas region when it comes into operation – in 2020, according to the schedule.

Concluding remarks

Ladies and gentlemen, to conclude:

Natural gas has a range of good properties that makes it perfect for an energy market that demands large amounts of energy, but with lower emissions than before. Gas is reliable, it is flexible and is available in abundance.

Gas can drive emission cuts  at low cost without compromising on energy security, and it works well together with intermittent renewable energy sources and makes sure Europeans can keep warm during a dark and windless cold winters, that the industry can function all year, and that lights can be switched on when needed.

Ever since exports from the Ekofisk field started more than 40 years ago, Norway has been a reliable supplier of natural gas to Europe. We will continue to be just that for the decades that lie ahead of us. 

Norway will continue to make a significant contribution to a sustainable energy system in Europe, as a large supplier of natural gas.

Thank you for listening and enjoy the conference!