Lunsjforedrag Norway House i Houston

Tale i anledning et lunsjseminar på Norway House i Houston om norsk petroleumsvirksomhet.

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Distinguished guests, dear friends of the energy industry, it is an honor for me to speak to such a prominent audience.

I am very happy to be in the Oil Capital of Houston - and to give you a flavor of the Norwegian petroleum activity.

What I am about to talk about today is: "Norway As a stable supplier of oil and gas and our world class service and supply industry.

Let me start with the context and the broader picture for our discussions on energy.  

The world needs more oil and gas

Last year, the countries of the world under the UN framework adopted new sustainability goals for 2030 and agreed on climate change action in Paris.The consensus on these areas are important,  And they are closely connected.

Extreme poverty has to be eliminated, social inequalities have to be levelled and climate change has to be handled. These challenges call for global solutions.

The world need sustainable energy systems. And I like to highlight its three equally important pillars:

o An Environmental pillar In order to reach the climate change goals and limit the local pollution.

o A Social pillar – supporting affordable energy for all.

o And An Economic pillar – supporting growth and jobs.

Furthermore - The World Population is growing sharply. By the end of this century, there will be more than 11 billion on Earth.

Today, there are between two and three billion people using wood, coal, charcoal or animal waist for cooking and heating. Even more people need to be lifted out of poverty. They all crave improved  standard of living. That’s why access to more high quality energy is a prerequisite for better health, quality of life and education.

At the same time, action is needed to reach the global climate change goals. In short: We need more energy and less emissions.

Reaching the global sustainability goals requires more, and higher quality energy for more people. Although the growth in renewable energy is encouraging, even with improved energy efficiency, it cannot cover global energy demand for many decades ahead.

Moving forward, fossil energy will still be the backbone of world energy supply. That´s why oil and gas, not least oil and gas from Norway, is part of the solution.

That´s the global context. Now, allow me to give you an overview of the Norwegian Petroleum Sector.  

The Norwegian petroleum sector – overview

The petroleum activities have been crucial for Norway’s economic growth, and for financing our welfare state. This is the main reason why Norway time and time again has been ranked as the best place to live.

Based on our petroleums revenues, we have also created a Sovereign Wealth Fund. It is currently valued at more than 800 billion US dollar - about 150 000 dollar per Norwegian. And the fund is still growing.

The oil and gas industry has generated jobs and activity all over the country. More than 200.000 people work in companies involved in the industry. In a country with only five million inhabitants, this is a large number.

All the petroleum activity in Norway is located offshore. We started in the south and have gradually moved to the North.

US oil companies, like ConocoPhillips and ExxonMobil, have been, and still are, important players in Norway. Many US companies in the supply industry have significant presence in Norway as well 

Actually – it was the Phillips Petroleum that struck oil for the first time back in 1969. (Ekofisk) Just before Christmas. On behalf of the Norwegian people, I am grateful for that!

In 2015, Norway produced around 1,5 million barrels crude per day, and we sold a total of about 115 billion cubic meter of gas.

Almost all our gas production is exported , and almost a quarter of Europe's gas use consumption comes through pipelines from the Norwegian Shelf.

Our petroleum policy

Since the beginning, we have enjoyed a broad political consensus on the long-term Norwegian petroleum policy.

This has resulted in  stability and predictability, which is of crucial importance for our competitiveness and for sound resource management.

Some important cornerstones of this regime are:

o A clear division of labour between the government and the commercial companies.

o Transparency, stability and predictability in framework conditions.

o To work with the forces of the free-market economy, not against them.

o To take benefit of competition and cooperation between commercial companies.

o And to secure a large part of the resource rent to the Norwegian people.

Thus, the State uses the oil companies as agents to create value from its oil and gas resources. The States secures  a large share of the resource rent through the established fiscal framework conditions.

Policies and measures have changed due to new realities in our activities or in the global petroleum industry. Adapting to changing realities is important to create maximum value. Stability is not the same as being static.

I am proud of the results. I think it is fair to say that our policies have been successful. And it is – by far – not over yet!  

Our resource base

The Norwegian Continental Shelf consists of three main areas: the North Sea, The Norwegian Sea and The Barents Sea.

o The North Sea is the most mature area and the biggest producer. It still holds huge reserves. Just last week, I had the pleasure of opening a new field development, Edvard Grieg, named after the famous composer.

o The Norwegian Sea is less developed area and two-thirds are yet to be produced

o The Barents Sea in the north is our newest petroleum province. Only two percent of the estimated resources have been produced.  

The Barents Sea is not Alaska

Much of our remaining oil and gas resources are located outside Northern Norway, where the Barents Sea has established itself as a new and promising petroleum province.

I would like to make some comments on petroleum activities in our High North – or the Arctic if you prefer.

First - The conditions in the High North are diverse. The climate conditions vary substantially throughout the region.The Norwegian mainland  beyond the Arctic Circle is inhabited and well developed. The ocean is for the most part ice free.

Close to 500.000 people inhabit the three northernmost counties in Norway, making it the most densely populated High North region in the world. I grew up in a small coastal community in the High North part of Norway. I can tell you: We have cities, roads, hospitals and universities.

In other parts of the High North the climatic conditions are totally different. They are remote, and the ocean is covered in ice all -or parts of the year.The Gulf Stream makes conditions in the Norwegian Barents Sea more similar to the areas further south on our Continental Shelf than elsewhere beyond the Arctic Circle.

Second – activities in these areas is nothing new. In Northern-Norway, industrial scale activitities have been going on for more than 100 years.

Parts of our Barents Sea were opened for petroleum activities in 1979, and we have drilled more than 100 exploration wells in this area. The first discovery was made in the early 1980-ies.

We have one producing field, one more to come onstream this spring. We have discoveries in the late planning phase and we have others under appraisal.  

There is also a lot of competition between oil companies to secure more exploration acreage in our regular concession rounds.

And third: The activities on all parts of the shelf  are based on the highest health, safety and environmental standards. This also includes the High North.

We permit no activity unless it meets our strict standards. This includes catering for both new and traditional industries living side by side.

Sustainable production

Norway combines the role as a frontrunner in climate change policies and being a large exporter of oil and gas.

Since the beginning, we have developed very stringent environment and safety regulations. That includes climate change policies.

Already in 1991, Norway introduced a high CO2-tax for the upstream oil and gas activities. Flaring of gas has never been accepted – if your reservoir hold gas you need to find a gas solution. The sector is also included in the European emission trading system – the ETS.

And it works! We have estimated that the CO2-tax, together with the emission trading system, has helped to reduce emissions from the petroleum sector with more than five million tons per year.

This represents about 10 percent of Norway's total emissions. I encourage more countries to follow this example.

We will continue to produce our petroleum resources with a low environmental footprint. With CO2-pricing, oil companies have strong economic incentives to reduce their carbon footprint.

Reliable supplier of clean gas

An effective way to reduce CO2-emissions is to replace coal with gas in power production. Just look at UK in the 90's or the US during the last few years.

In Europe, the potential is huge. Switching from coal to gas will deliver significant results in terms of lower emissions. This is among the easiest, cheapest and fastest way EU-countries can cut their CO2-emissions.

An efficient policy based on carbon pricing through an improved ETS will deliver such a change.   Natural gas is a vital source of energy for Europe. It is crucial for maintaining electricity security and residential heating during winters, and as feedstock for industry. On a daily basis, more than 250 million Europeans rely on gas.

Norway supplies almost a quarter of Europe's gas consumption; we are the second largest exporter after Russia. More or less all the gas that we produce we deliver to Europe through pipelines.

Energy security has been at the heart of the European debate on gas. Even if history shows that supplies have remained stable and without any major disruptions over decades – even during the cold war.

I believe the best way to handle energy security is to develop well-functioning energy markets with diversity of supply and sufficient infrastructure.

As for Norwegian resources: so far, only one third of our estimated gas resources have been produced. Another third are expected to be produced over the next 20 years. The final third will be left for production beyond 2035.

I am confident on behalf of Norwegian gas. We have the resources, the technology and the competence to compete in a well-functioning market for the long term. Oil and gas from our northern region may contribute to European security of supply for decades to come.

World class technology and services

So far, I have talked about our resources. But as my title indicates – we also have a supply and service industry to be proud of.

Developing domestic industry capabilities has been a political goal since the very beginning.  It has required a strong focus on education and R&D. Norway have hugely benefitted from engagement from US companies also in this respect. 

As a result, our supply industry is now competing worldwide. To have a competitive supply industry at our doorstep is definitely an asset when it comes to utilizing our oil and gas resources. Many of these companies are now present in Houston.

Both government and industry must be able to recruit human capital - with the right competence, skills and knowledge.

This is fundamental for securing sound resource management, including safeguarding the environment and maintaining high safety standards.

Government support for petroleum R&D has been an integral part of our efforts to optimise resource utilization and to build a competitive Norwegian-based industry. This includes research institutes and the academic sector.

Dynamic positioning systems, floating production and low emission supply vessels for are examples of technologies that combine maritime expertise with that of our oil and gas activities.

As an example - Kongsberg Maritime has a global market share of seventy per cent for its dynamic positioning systems.

The problem, however, is that the market has nearly collapsed.

Subsea-technology and multiphase transportation are other areas, in which the Norwegian oil and gas cluster is in the technological forefront.

This is the result of long-term, dedicated R&D efforts, often in co-operation with international stakeholders.

Rough weather conditions in the North Sea, stringent regulations, as well as demanding operators are among the factors that have contributed to the development of Norway’s petroleum service and supply industry.

The Norwegian shelf has functioned as a technology laboratory, resulting in the development of high-tech and innovative solutions. 

Today, the service and supply industry consists of more than 1250 companies across the entire value chain: From seismic and drilling rig equipment, through valves, pumps and hoses - to advanced offshore supply and service vessels and subsea equipment..

The Norwegian petroleum industry also has a strong track-record meeting the high environmental standards set by the authorities.

Conclusion - Today's challenge

Distinguished guests, dear friends of the industry – it is time to round off my speech.

As we all know the oil price has dropped dramatically from the high level in 2014. These are difficult times - especially for those who have lost their jobs.   Let me make a brief comment on how the Norwegian government face this challenge:   First - We will maintain a stable, predictable and transparent long-term policy.

Second - We provide oil companies with new, prospective acreage for exploration.

And third - We will also continue to strengthen the petroleum research in order to enhance innovation - and to cut costs.

We are also backing Norwegian companies in their activities overseas.

Last - but not least, we strongly support the efforts the different companies undertake to improve efficiency and reduce costs.

This job is absolutely necessary and results are underway. One example: the estimated costs of developing a major discovery in the Barents Sea, such as the Johan Castberg development,  has now been reduced by 40-50 per cent.

This is promising.  I hope that similar reductions will be possible elsewhere on the NCS. This will make us even more competitive in the years to come.

I hope I have given you a flavour of some key aspects of the NCS, and will be happy to answer questions you may have.

I sign off with a photo from what I would call at perfect day in my job – the official opening of a new oil-producing facility.

Thank you for your attention!