Speech/article | Published: 2007-06-18
My message to all of you, the leaders of StatoilHydro, is that you must seek to preserve and protect the social licence. What do I mean? I mean that you can’t just depend on the capital markets. You also have to rely on the broader trust of the Norwegian people, Foreign Minister Jonas Gahr Støre said in his address to StaoilHydro.
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Good evening, ladies and gentlemen,
It is both an honour and a pleasure to be with you on this historic occasion – the first gathering of StatoilHydro’s top brass and a milestone in the launching of Norway’s new industrial and technological flagship.
I am proud to have been asked to share with you a perspective from both outside and inside – outside the company and outside the industry – but inside Norway and inside a belief in change and adaptation.
My mission here today is not to provide new insight into energy markets or production modalities. You already have all the facts and all the insight.
What I have seen as foreign minister is that energy has re-emerged as a central theme of foreign and security policy. Energy security is not a new concern. The difference now is the greater complexity of the issue – and the increased awareness, the sharpened focus.
In the globalised world of the 21st century, “old” questions about the availability of petroleum are interlinked with “new” questions about the acceptability of petroleum. This affects both security of supply and security of demand.
As a consequence, calculations of energy security encompass not only geopolitical factors and the interests of states. This area also includes broader social and environmental issues that I will touch upon here this evening.
But first, let me share with you another perspective, one about identity and responsibility – one about who you are and what we – that is Norway – expect from you.
StatoilHydro is not just any company. No matter how we define it, it will stand out as Norway’s flagship and an industrial and technological locomotive. This flag will be easily seen in Norway – and worldwide.
The successful history of both Statoil and Hydro is closely intertwined with the rise of Norway as a modern nation-state – prosperous, economically competitive, technologically advanced.
In short, StatoilHydro cannot avoid being perceived as the national oil company of Norway. In a world of increased resource nationalism, this is probably more of an advantage than a disadvantage, especially for you. But we must all, and especially the Government, be crystal clear about roles and responsibilities, distinguishing the politics of energy from the business of energy.
The merged company will retain a high level of public ownership. I believe this is a good thing.
Such ownership has not constrained the operations of Statoil and Hydro in the past. You have conducted business as professional and effective commercial entities.
This will – of course – be of paramount importance also in the future.
Furthermore, the Norwegian Government will continue to use regulatory mechanisms to set standards for and influence industrial operations.
However, you will also rely on a broader social licence to operate granted by Norwegian society. My message to all of you, the leaders of StatoilHydro, is that you must recognise this and seek to preserve and protect this social licence.
What do I mean? I mean that you can’t just depend on the capital markets. You also have to rely on the broader trust of the Norwegian people.
As Norwegians, we are, in effect, both shareholders and stakeholders of the company. How you manage the business – how you find, produce, transport and consume energy – is important to us, from both perspectives: the shareholders’ and the stakeholders’.
What you do – and how you do it – also matters urgently to the world, for the future of our planet. Nothing less. So, take a deep breath.
You will depend on the trust of the Norwegian public as you continue your operations at home and as you move into new markets far away.
The way you operate, the way you deal with colleagues and employees, the way you build effective transnational teams, the way you respect and protect labour rights, the way you safeguard the environment – all of this matters – all of this is being closely scrutinised.
How you perform affects your brand, for better or for worse. To many, Statoil and Hydro are synonymous with Norway. You fly our flag. In some respects, therefore, our brands come together. This we need to manage carefully.
Ladies and gentlemen,
Let me then turn to some broader challenges in the interlink between energy, climate and foreign and security policy.
Energy security and climate change are at the top of everyone’s agenda – and they are likely to remain there.
Addressing climate change is emerging as a global political priority. Energy security and climate change must be viewed as twin challenges and so also as key foreign policy issues.
To some extent, Norway’s political opportunities and challenges as a leading energy exporting country mirror StatoilHydro’s commercial opportunities and challenges as a significant international energy company.
On the one hand, we are both seeking to utilise our human resources, our expertise and capital to increase the availability of petroleum. We produce more of the oil and gas that the world needs for growth and development. We provide energy security. And we make money doing so, creating value for both Norwegian society and company shareholders.
On the other hand, we are both affected by the increasing focus on the environmental and social costs of oil and gas production.
So far, both the Government and the petroleum industry have managed to rise to the sustainability challenge. However, make no mistake, more will be expected of us in the years to come.
On climate change, the Government has already signalled that it will lead the efforts to mitigate the negative effects of Norway’s oil and gas production.
This Government has set a double ambition: we want to strengthen Norway’s role as a provider of both energy security and climate security.
We will remain a leading energy nation. And we are striving to be among the most advanced and committed nations when it comes to minimising greenhouse gas emissions from the production and consumption of fossil fuels.
Speaking in Oslo last February, EU Trade Commissioner Peter Mandelson said that Norway’s approach to energy and climate “sounds like a paradox, but is in fact profound insight.”
Paradox or profound insight?
It is certainly a dilemma – Norway with an ambition of being both a leading petroleum producer and a leading player in efforts to limit climate change. The point, however, is that this is not only our dilemma. Most of the world is part of the petroleum value chain – as consumers we all more or less depend on oil and gas.
Norway’s dilemma is a global dilemma and it must be dealt with as such.
It is fashionable nowadays to refer to a world “beyond petroleum”. However, the International Energy Agency (IEA) reminds us that there is no quick and easy way for the world to kick the fossil fuel habit. It will not happen tomorrow, and if we want it to happen – as we should – we need to manage the process carefully.
According to the World Energy Outlook 2006, fossil fuels will remain the dominant source of energy up to 2030. Oil, natural gas and coal will account for 81% of overall energy demand in 2030, compared with 80% in 2004. And the total consumption is very likely to increase. If we fail to act, the emissions of greenhouse gases are in for a real increase and that we cannot let happen.
Energy security is about making supplies available, reliable and affordable.
As the world’s third largest exporter of oil and gas, Norway has a special responsibility for securing supply to a broad range of customers. We take this responsibility seriously.
Production in the North Sea may have peaked, but the Norwegian continental shelf still has large untapped resources. It is our responsibility to bring these resources to the market, provided it can be done without causing harm to the marine ecosystem.
It is this supply-side perspective that tends to dominate my discussions on energy with colleagues abroad. They want to learn more about resources, reserves, pipelines and development projects, from Ormen Lange to Snøhvit, on the Norwegian continental shelf.
We tell them what Norwegian officials have told the world since the 1970s: we do not play politics with energy, we are reliable suppliers who honour commercial contracts and we plan for the long term.
And they, on their part – those on the receiving end of pipelines and tankers – they know this. As Tony Blair put it at the opening of the Langeled pipeline last autumn: “Norway is at the top of the energy agenda”.
But we too need to broaden our perspective, and we are doing so.
Over the last two decades, the world has amassed a series of scientific reports that leave no doubt about climate change and global warming:
It is man-made, it is serious, it is accelerating, and it can only be halted if we act swiftly.
The relevant questions are not whether measures should be taken, but rather what type, how much and when.
Moving beyond the Kyoto Protocol, we need a framework – internationally agreed – within which developing nations can grow, wealthy countries can maintain their standard of living, and the environment can be protected from disaster.
We also need to craft the next climate agreement in such a manner that it includes the developing world. To do so, however, we – the industrialised countries – must meet the twin challenges of cutting our own emissions while at the same time providing assistance to developing countries so that they can grow without increasing their emissions.
We must do so by limiting our own emissions and by developing new technologies that can address the problem on a global scale.
Norway has set ambitious emissions reduction targets for itself, and let me sum up the three targets we have set.
First, we aim for a 30% reduction of carbon emissions by 2020.
Second, by 2012 – the end date of the Kyoto obligations – we have set ourselves the target of reducing our emissions by an additional 10% on top of our initial Kyoto Protocol commitments.
Let me explain this: Kyoto allows Norway a 1% increase in emissions in 2012 compared to 1990 levels. We have now decided to unilaterally set ourselves the target of reducing our emissions by 10% by that date.
Third, looking further ahead, our overriding goal is to make Norway carbon neutral by 2050.
A broad set of measures will be needed to reach these goals – measures taken at home and measures taken abroad. And the energy industry will be crucial in making change happen.
We have a lot of experience. Norway arguably made its first contribution to climate security in the early 1990s when we introduced a CO2 tax on petroleum production. Today, the Norwegian continental shelf is the most energy-efficient petroleum producing region in the world, with CO2 emissions that amount to less than one third of the global average per unit produced. I know that we have many of you gathered here to thank for that.
It shows that environmental regulations and taxation can spur technological innovation and make business more, not less, competitive in world markets.
The industry will have to continue on this path, with even greater steps. And I have no doubt that this will become more of a competitive advantage in the future. That is why we need to succeed at Mongstad – together – in developing a full scale Carbon Capture and Storage project.
I welcome the way Statoil and Hydro have set corporate targets for GHG emissions in anticipation of new policy trends, and are investing in the “decarbonisation” of their future energy supply business – as well as venturing with dedication into renewable energy.
All of this makes sense commercially. And – with reference to my introductory remarks – it makes sense in relation to what the Government, what Norwegian civil society expect of StatoilHydro.
So, Norway’s paradox is the world’s paradox – as it is StatoilHydro’s paradox. On the one hand, you are striving to excel by increasing your reserves and your production. On the other hand, you are seeking to lead the way in industry’s efforts to combat climate change.
There are real challenges ahead. Such as facing the environmental implications of new investments in tar sands and heavy oil.
Think about it: this was less of a pressing issue a decade or so ago – when Statoil invested in heavy oil in Venezuela, than it is today when you are acquiring tar sands assets in Canada.
Today, you need to come up with good answers – because the world cares, and because the reputation of Statoil, Hydro and Norway is at stake at the same time.
Ladies and gentlemen,
How StatoilHydro fares in the years to come will in part depend on how you deal with the dilemmas I spoke of earlier.
From my perspective, there is another set of challenges where our paths are bound to cross – you as energy professionals, and I as foreign minister – as you move into new markets far beyond familiar regions and cultures. These are the regions and energy provinces where new resources are to be found.
So, what is your challenge?
I have heard some in the industry say that the challenge is to “be the cleanest guy in a dirty business.”
“The cleanest guy in a dirty business.” This is not the kind of “bumper sticker mission statement” that corporations pay consultants a lot of money to come up with.
However, it is probably a pretty fair epithet. And I like it, both as a statement of ambition, and as a candid assessment of the challenge the petroleum industry’s reputation faces.
You may object – and you may be right – that the perception of the petroleum industry as “dirty” is both outdated and unfair, especially as far as the performance of Statoil and Hydro is concerned.
I hear you. I am aware of Hydro’s longstanding leadership in the World Business Council for Sustainable Development. I also know that Statoil ranks first among international oil and gas companies on the Dow Jones Sustainability Index – and has done so for the last three years in a row.
Moreover, you do not have to convince me that projects like Snøhvit and Ormen Lange, like those before them on the Norwegian continental shelf, represent high-tech breakthroughs that make it possible for oil and gas to be produced ever more safely, reliably and clean.
The liquefaction facility at Melkøya constitutes part of Norway’s industrial and technological revolution over the last few decades. I have brought foreign guests there three times recently, and I can sum up my impressions in the following way: Finland has Nokia, Sweden has Eriksson and Norway will have StatoilHydro at the core of an innovative petroleum cluster, with state-of-the-art technology, cutting-edge knowledge and modern ambitions.
However, the processing facility at Melkøya is by no means carbon neutral. This compounds our common climate change challenge. And it strengthens the general public perception of the petroleum industry as a serial polluter.
International oil and gas companies tend to go where the resources are. And more often than not, the resources tend to be in places where the above ground risk can be as high as or higher than the below ground risk. As StatoilHydro continues to expand overseas beyond the OECD area, it is likely to encounter considerable country risk.
Country risk is linked to a lack of transparency, accountability and good governance. When operating in such an environment, the international oil industry is held up to a high standard of corporate social responsibility and faces criticism from civil society, because it is often unable to serve the wider developmental purposes of promoting the expansion of economic and political freedom for the people affected.
Of course, you are already accustomed to dealing with the questions that arise in connection with operating in countries troubled by human rights abuses, violent conflict, corruption and widespread poverty. You can draw on earlier experience.
But you should also be prepared for even closer scrutiny in the years to come.
It is also important that you continue the tradition of working with a broad group of stakeholders – governments, multilateral institutions, civil society organisations – to help fill the governance gaps that increase country risk.
International oil companies are sometimes accused of having a corrupting or corrosive influence on host countries, especially when state institutions are weak, and unable or unwilling to manage the inflow of revenues from petroleum investments in a responsible manner.
Civil society organisations have been pressing international energy companies to “publish what they paid” to host governments in resource-rich countries. Over the last few years, both governments and international institutions have joined this work.
“Publish what you pay” has inspired new initiatives, such as the Extractive Industries Transparency Initiative (EITI). The goal of EITI is to develop an international norm for revenue transparency in the extractive industries. Both Statoil and Hydro have been valuable participants in this process, and the Norwegian Government is pleased to receive the new secretariat for EITI in Oslo.
Norway’s Oil for Development Initiative also seeks to translate petroleum resources into improved welfare for the population. It has attracted considerable interest, and we are seeking to make it an effective tool in our development policy.
So, these are some of your challenges – what, then, are mine?
The Norwegian Foreign Service has always followed and supported Norwegians on their ventures abroad. It was precisely the dispute over the management of Norwegian consular services and assistance to the shipping industry, that lead to the break-up of the union between Norway and Sweden in 1905.
Since then it has been the ambition of the Foreign Ministry to assist Norwegians – whether they were missionaries, traders of fish, timber, ships or metals, or taking part in a whole spectrum of other activities – as they ventured into known and unknown markets, known and unknown cultures.
Consequently, we stand ready to accompany the oil and gas industry – and the whole supporting contractor industry – in its future ventures. We see this as an exciting challenge as many of the new markets are found in complex political and geographical settings where Norway has less experience and is less well known.
For the Foreign Ministry, however, this will require a re-evaluation of where we stand at present. It will require a new focus on the capacities and training of our diplomats. It will require improving our ability to establish and develop political relations. And it will require a strong understanding of new and different cultural and political settings – while standing firm on universal human rights norms and standards.
In all of this, we should draw upon a solid Norwegian tradition – the one of close dialogue between industry, government and civil society.
Ladies and gentlemen,
Let me conclude with a few words on the opportunities and challenges in the High North, including Norway’s relations with Russia. This has been much in the news lately due to the Prime Minister’s successful visit to Murmansk, St Petersburg and Moscow.
The key external drivers of Norway’s policy in the High North are, simply stated, energy, climate change – and Russia. It is also the combination of these three dimensions that is drawing increased international attention to this region at the very top of Europe.
The focus is regional but indeed also global: geo-economic because of the re-emergence of energy security concerns, “geo-green” because of the urgent need to address climate security, and geo-political because of Russia’s remarkable change of fortune, power and attitude over the last seven years.
Norway and Russia share the Barents Sea and many of the sustainability challenges of the High North.
If we are to maintain the northern seas as some of the cleanest, richest and most productive marine areas in the world, our two countries must expand our cooperation with regard to the harvesting of fish stocks, exploration, production and technological developments in the petroleum sector, as well as the adoption of health, safety and environment standards in petroleum operations and maritime transport.
This is the basis upon which Norway seeks to engage Russia. Our approach is one of pragmatic realism. We welcome the fact that Russia appears to be finding its place in European and regional cooperation. We welcome Russia joining multilateral institutions such as the WTO and the OECD. And we are happy to see Russia as an integral part of the Council of Europe, with the obligations that follow.
However, it is still not clear to us how Russia will evolve in a number of key areas, such as the rule of law, freedom of expression, role of the media and the protection of human rights. Thus we need to follow developments closely and we need to be ready to speak our mind in our open dialogue with Russia.
On the Russian side, as you know, President Putin has called for a strategic energy partnership between our two countries in the High North. Successive Norwegian governments have accepted the invitation.
The question now is what it takes to realise this ambition and achieve a quantum leap in economic and industrial cooperation between Norway and Russia.
Let me review some of the key criteria for success.
First, prospects for energy cooperation will, of course, be linked to resource potential. The more plentiful the resources and the bigger the discoveries, the greater the mutual attraction.
Second, the prospects for cooperation will also be determined by the investment climate. Foreign investors, such as international oil companies, must have access to licences and reserves on terms that are favourable enough to compensate for technological, financial and perceived political risks.
Most industry observers would agree that such conditions still exist in Russia today. There is no denying, however, that increased resource nationalism, state control and government involvement, coupled with examples of what appears to be the selective application of existing laws, have increased the overall risk associated with investing in the Russian energy industry.
Third, political agreement between Norway and Russia on a delimitation line in the Barents Sea would release considerable potential for cooperation in the petroleum sector.
Today’s area of overlapping claims, which covers a total of 176 000 square kilometres, would then probably be opened for exploration and production. We have negotiated since the 1970s; we have come far and now we should be prepared to conclude. But Norway will never negotiate under pressure of time. That would not serve our interests.
Fourth, a combination of industrial complementarity and geographic proximity could also release the potential for energy cooperation between Norway and Russia. Both sides stand to gain from cross-utilisation or co-development of skilled labour, specialised offshore technologies, logistical networks and other infrastructure in the High North.
We need to take a generation perspective to fully realise the potential for a strategic energy partnership with Russia in the High North. It cannot be done in just a few years. And it will not be achieved through the development of a single field.
Russia knows fully well what our industry stands for. Both Statoil and Hydro have had our full support in presenting their case for the Stockman field. It seems obvious that your experience would fit hand in glove with Russia’s ambitions to go offshore in the deep, cold and often dark Barents Sea.
Ladies and gentlemen,
Your task as StatoilHydro’s G-500 is to make the merger a success, to create a new corporate entity, which is greater than the sum of its two constituent parts. This will be no small feat, of course, but it is eminently do-able for high-calibre people who thrive on the major challenges. People like you.
By accomplishing this task, you will also bring the Norwegian oil and gas cluster, and the petroleum industry as a whole, to new levels of excellence with regard to value creation, technology and sustainability.
As I emphasised at the outset, by doing so you will also be writing the next chapters in the history of Norway’s industrial and technological development.
Be prepared for this exciting task. We look forward to following your ventures – fascinating as they are. Our expectations are great.
And don’t forget my key message: your success depends on meeting the expectations of both shareholders and stakeholders.
Your industrial licence to operate will depend on you being faster, cheaper, better. These are the traditional competitive criteria of industry.
Your social licence to operate will depend on how you meet the environmental and societal challenges of which I have spoken here today.
It is your combined knowledge of these issues that will secure the commercial success of StatoilHydro and the pensions of new generations.
It is key for securing the living conditions of the planet. And remember – it is not a planet that we have inherited from our parents – it is a planet that we are borrowing from our children and grandchildren.
I thank you for listening and I congratulate you on making history here today.