Minister of Petroleum and Energy Tina Bru gave this speech at Sparebank 1 Markets Energy Conference in Oslo on February 26th 2020.
Checked against delivery.
Ladies and gentlemen, friends of the energy industries, good morning!
Let me thank Sparebank 1, for focusing on investment opportunities in our energy sector.
As many of you represent investments, one way or the other, consider this opening speech a sales pitch.
And in this pitch, I will try to answer two questions.
First, why invest in Norway's energy sector?
Second, what will be my priorities, as Minister of Petroleum and Energy?
- In strengthening the prospect of our energy sector,
- and its important role for Norwegian society.
I want to acknowledge the vital role you have, representing capital and investments.
You are essential for the development of hydropower and petroleum activity in Norway.
Capital and investments will continue to play a crucial role in developing this energy nation into the future.
First, a few words on Norway as an energy nation:
Hydropower has been the basis for Norway’s industrial development and prosperity for more than 100 years.
Thanks to the hydropower, and in the later years also wind, we have a near emission free power system.
In normal years, we have a surplus of renewable power. Moreover, our renewable industry employs around 20.000 thousand people. Our electricity system is the heartbeat of the Norwegian economy, supplying industries, businesses and homes with reliable electricity at competitive prices.
Our oil and gas industry fuels Europe and beyond. In addition to being our biggest export sector, it is also important for suppliers and service providers on the mainland.
Our petroleum resources, have been a blessing for this country for nearly 50 years. They have brought higher living standards to all Norwegians. The way we have managed our resources is a true Norwegian success story.
We have built an industry that has brought enormous revenues, supporting a strong welfare society with the highest standards of living.
Energy has shaped our past, and energy will shape our future.
We all know that energy, and fossil fuel energy in particular, is powering the global economy. Coal, oil and gas covers more that 80 percent of the global energy demand.
Over the last decades, hundreds of million people have risen out of poverty and into a decent standard of living. Economic growth, access to clean water, electricity, food, medicine, education and transportation is fueled by affordable coal, gas and oil.
However, It takes a lot more to reach the global sustainable development goals. For instance, more than 700 million people –10 per cent of the world's population – still live in extreme poverty. Many more depend on traditional energy for cooking.
Access to modern energy is necessary to change this. Getting the right energy is also going to save lives. Indoor air pollution is still causing 4.3 million deaths every year, according to UN figures.
At the same time, global greenhouse gas emissions from our use of fossil fuels contributes to climate change.
Thus we need both more energy and lower emissions. These are global challenges that need global solutions.
These challenges also put the oil and gas industry under the spotlight. Particularly in our corner of the world.
Our petroleum industry wants to be part of the solution. The new ambitions recently announced by the industry to cut their emissions is a clear and very positive commitment.
People need to know that the industry are taking these issues seriously.
Taking on these challenges is necessary to secure a position as a long-term reliable energy provider, whether it is oil or gas.
On that note, let me be very clear:
It is the Government's policy and my duty to make sure we continue to produce profitable oil and gas.
The world needs energy, and the world needs to cut emissions. How do we square this circle?
I do not have all the answers, but let me share some experiences of how we are taking on these issues. Let me call it the "Norwegian way".
The Norwegian way of securing energy for the future and reducing emission goes like this: commit to international agreements and keep in mind that this is a global challenge that requires global solutions.
We are committed to the Paris Agreement.
We set ambitious targets for reducing domestic emissions within these frameworks and we invest in key technologies that can cut future global emissions.
We will still use a combination of a CO2-tax and the EU Emission Trading System to provide incentives for companies on the Norwegian Continental Shelf to reduce their emissions.
We know this works. The carbon footprint from production per barrel on the NCS is about half the global average.
Our CO2-pricing is pushing the industry to improve further. I am therefore very pleased with the ambitions presented last month by the Norwegian petroleum industry to reduce absolute emissions by 40 percent by 2030, and to near zero in 2050.
An article in Science found that global emissions from production of oil gas may be reduced by as much 700 megatons annually if the emission levels on the NCS were achieved internationally. This is 13 times Norway's total emissions per year. The world can learn from the NCS.
So, what implications does a low carbon future have on the NCS? One thing is for sure – the next 50 years will not look like the past 50. Both the petrolum sector and the activities on the NCS will continue to change.
I am certain that our continental shelf is a petroleum province for the future.
The goals of our petroleum policy remains the same: To provide new acreage, and stimulate exploration, developments of finds and increased recovery from existing fields.
I am encouraged by today's high investment level on the NCS. International studies like one from the Natural Resource Governance Institute, rank Norway top in the world for value realization from extractive industries.
Stable and predictable investment conditions are key to our success in Norway.
In addition, a highly skilled work force, cooperation, an advanced and diverse supply industry and petroleum cluster, third party access to infrastructure and low entry barriers, make Norway an attractive place to invest.
It is no surprise that the interest for exploration on the NCS remains high. Last month the yearly APA-round awarded 69 licenses to 28 different companies. This is the third largest award round ever.
2019 was also a good year for exploration on the NCS with the number of discoveries increasing by 55 percent year-on-year.
These are all examples of the continued strong business interest on the NCS and indicate that the industry has a long-term perspective.
We will also continue to support R&D in the sector to create the upstream technologies of the future.
What we do on the Norwegian Continental Shelf points in the right direction. It is an answer to the challenges we are facing.
The Norwegian way is also about:
- Exporting gas to Europe, a key to the transition to a low emission society. It helps reduce the use of coal, and supports intermittent renewables like wind and solar.
- Or carbon capture and storage to decarbonize the energy system and industrial processes. If we succeed in our efforts, it will demonstrate how technology and competence from this sector may help other industries in managing their hard-to-abate emissions.
- In the long run, gas can be reformed into hydrogen, with the CO2 captured and stored.
- Offshore wind. There is an increasing demand for emission-free power. Offshore wind has a great potential to cover large parts of this demand.
Today, offshore wind is Norway's largest renewable export industry. It has the potential to become a new industrial adventure.
I could also have mentioned:
- Using offshore technology to develop aquaculture in food production.
- Or extracting minerals from the seabed for energy storage, batteries, smart phones and electrical cars.
The list is long, and the scope is wide.
My point is that we would never have had these opportunities without the knowledge and experience we have gained on the Norwegian continental shelf.
And it convinces me, and hopefully you, that investing in this sector, is investing in the future.
Let me turn my attention to renewables.
The connection between petroleum and renewables is getting increasingly stronger.
One example is the Johan Sverdrup-field. Thanks to renewable power from the mainland, the CO2 emissions from Sverdrup are only 700 grams per barrel produced. The world average is 18 kilos!
I mentioned the initiatives from the petroleum industry to radically cut their emissions. Using renewable power from the mainland or from offshore wind is a precondition for meeting these ambitions.
This calls for a broader approach to our energy system.
We have a unique starting point.
Norway runs on renewable electricity, most of it flexible hydropower. In addition, a lot of onshore wind power has been built or is under construction.
Our renewable share in our energy mix is close to 70 percent. The EU has a goal of reaching 20 percent this year.
In the years ahead, we expect to see a rise in power consumption, as a result of new industry projects, and increased electrification of our petroleum sector, in transport, industry and households, to mention some.
According to the Norwegian Water Resources and Energy Directorate, the domestic demand for power is expected to increase 14 percent by 2040.
Norway is well placed to meet the growing demand for electricity. Today, Norway has a power surplus of about 15 terrawatt hours. We also expect to have a considerable surplus in the years to come.
If we turn our attention abroad, we can expect a major transition in the European power system towards more intermittent power sources, such as wind and solar energy.
To meet the rapidly changing conditions in the European power market, we must make sure we invest in renewable production that is profitable for both the investors and the society. We must preserve our flexible hydropower and use our power resources more efficiently.
Last but not least, we must have a power grid adapted to increased consumption and new consumer patterns.
These are the main priorities of my Government's energy policy.
Let me also add our commitment to a market-based approach with regards to new renewable energy projects.
We deliver on these ambitions.
Currently, a lot of new power is being developed in Norway. In fact, we have not seen this level of activity for 25 years.
Furthermore, according to the Norwegian Water Resources and Energy Directorate, 135 billion NOK, or nearly 13.5 billion euros, will be invested on all grid levels towards 2027.
This indicates that investors see Norway as an attractive place to do business.
However, developing renewables in Norway also raises some dilemmas.
One issue is the construction of interconnectors.
Another is land based wind power. The latter has already become a significant supplement to hydropower, the backbone of our energy system.
In a few years, we expect onshore wind power to generate ten per cent of Norwegian electricity.
Wind power not only contributes to a surplus of renewable power. It provides a unique opportunity to utilize electricity in new ways and to create new and profitable jobs, for example in the Norwegian power intensive industries.
At the same time, we must take into account that the development of wind projects can have a negative impact on landscapes and the local environment.
Public acceptance is important for a long-term and sustainable utilization of our wind resources.
As many of you know, after receiving the proposal for the national framework for onshore wind last year, the government decided not to go further with the 13 areas proposed by the Water Resources and Energy Directorate.
We are now working to adjust our policies, particularly regarding the licensing procedures.
Let me stress, however, that the knowledge we have gained from the national framework process has been valuable.
In the public hearing, we have received valuable inputs on aspects such as:
- The tax system for wind power,
- Improving and tightening our current practice on licencing prosedures.
- Local involvement,
- And how to best take environmental issues into consideration.
We will await clarification on these issues before we resume licensing again. I cannot give you an exact date for this today.
I hope that the future debate on this issue will be more balanced - from both sides - with greater focus on the long term benefits of developing renewable energy.
Everything is about striking a balance.
Such as when some wind power opponents argue that international investors finance many wind farms and repatriate the profits.
My answer is that this is a feature of a well-functioning market. We welcome foreign investors as well as Norwegian ones, of course within the framework of Norwegian law and tax regime.
Norway has a long tradition for international investors in the development of our industries, whether they are investing in renewables, petroleum or other sectors.
I believe that Norwegian wind power resources will continue to be attractive for investors also in the long term. It is up to you as investors, however, to make the commercial decisions.
I can assure you that the task of the government is to put appropriate and stable conditions in place.
Let me round off by returning to the question I asked in the beginning, the most important one for any investor – the return on the investment.
Why invest in Norway's energy sector?
We know the climate is changing – we need to mitigate and we need to adapt.
We know technologies are changing.
And we the know the energy markets are changing.
These changes represent both challenges and opportunities.
There will be an increased demand for cleaner energy in the years ahead, both globally and in Norway. At the same time, we will need oil and gas for decades to come.
The energy sectors must adapt to new circumstances. And they do!
Hopefully, I have a made a strong case for why investing in energy in Norway is investing for today, as well as for the future.
I also hope I have convinced you of what our role as politicians should be: To strengthen what we already have, through stable and predictable investment conditions combined with a competent administration.
Thank you for your attention!