Energikonferanse arrangert av Europakommisjonen og Olje- og energidepartementet

Brussel 5.februar 2016

Check against delivery

Commissioner, colleagues, ladies and gentlemen.

For the 3rd time the Commission's DG energy and my Ministry organise this energy conference together. I think we can now call it a tradition.

This conference is a reflection of the energy partnership between Norway and the EU. Our partnership is further enhanced both with the Energy Union, and our close cooperation on climate policy issues.

In Europe energy and climate are intertwined. In order to succeed with the climate policy, it is necessary to succeed with the energy policy – and vice versa.

And the challenges are indeed not limited to Europe. Globally, we see a growing population with an increased need for energy. And at the same time the need to develop more sustainable energy systems:

The energy systems must be sustainable on three accords:

o Socially – meaning a system that supports affordable energy for all. o Economically – meaning a system that supports growth and jobs. o Environmentally – meaning a system that helps us reach our climate goals.

At the beginning of a new year, we usually look ahead. The Commission has done so, and has declared 2016 the "year of delivery" for the Energy Union.

When I am looking ahead into 2016, I have two items on my wish list as regards Norway's relationship to the EU:

o First, clear signals from Brussels and EU capitals that natural gas will play an important role in Europe's future energy mix. o Second, that further steps are taken to improve the functioning of the European energy markets.

The role of gas

Let me start with my first wish.

As everybody here is well aware of, Norway is a large supplier of gas to the EU. More or less all the gas that we produce is sold to Europe.

Currently, energy market experts tend to agree that the EU’s demand outlook beyond 2030 is quite robust.

In the public debate, however, the European gas demand going forward is a fact mentioned by very few voices, including those of policy makers.

For instance, the important role of gas should be expressed more clearly in European energy and climate policies. Gas seems to be the fuel everybody takes for granted.

However, to ensure future expansion of our export pipeline system to Europe, clear signals on the future role of gas in the EU energy mix are important.

Norway's gas resources have been developed based on gas pipelines connecting our resources to European markets. This has been to the benefit for all – consumers and producers alike.

Companies investing in such infrastructure will make their choice based on commercial consideration. Their choice will, among others, depend on whether they feel confident about a stong European market in the decades ahead.

The new UK policy to switch from coal to gas is the first important sign of a EU memnber state wanting to benefit from increased use of gas, as part of the solution to achieve their climate and energy goals.

The Commission is just about to launch its gas package. This is an excellent opportunity for the Commission to recognise the role gas can and should play to obtain a more sustainable energy system.

A clear message from the Commission and the EU on this would be very much welcome!

The role of gas should also be considered in the context of climate policy, and its potential to reduce CO2-emissions:

First, replacing coal with gas is a reliable, fast and cost efficient way of cutting emissions.Second, gas is the most flexible back-up for intermittent, renewable energy.

Thus, gas may contribute to a cleaner energy system – by replacing coal, by enabling the integration of more renewable energy and through more efficient use of gas.

Recently, Norway published our long-term gas production outlook.

The message is clear: Norway will remain a stable supplier of natural gas for decades to come. We expect our gas production to remain high and stable for the next decades.

Only one third of Norway's estimated gas resources have been produced. Another third is expected to be produced over the next 20 years. The final third will be left for production beyond 2035.

Norway has delivered reliable gas to Europe for decades and attaches great importance to ensuring long term secure supplies to Europe. For the EU –Norwegian gas supply should be considered as reliable as internal production.

Of our untapped gas resources, more than 30 per cent is estimated to be outside Northern Norway.

In these waters, Norway has conducted industrical scale activity in more than 100 years.

And this is not a new area for Norwegian petroleum activity either. We have been exploring the Barents Sea outside our Northernmost region for 35 years, and produced gas for almost a decade.

Our pipeline system from the Norwegian Sea was extended beyond the Arctic Circle last year. Thereby connecting our Arctic resources to the European market.

The operational challenges outside Northern Norway are similar to those in areas further south. We know that from more than 35 years of experience. Our activities – on all the areas on the Norwegian Continental Shelf – are conducted in a safe and environmentally responsible manner. That also applies for activity in the areas outside Northern Norway.

Oil and gas from our Northern region may contribute to European security of supply in decades to come.

However, gas investors in this region will need to make important decisions in the years to come. The alternative to connect a gas pipeline from the Northern region to the existing system further south, is liquification and export by ship, LNG. LNG offers more market flexibility to producers.

Gas supply requires large upfront investments in production and infrastructure, and investors need predictability to develop new projects.

Put simply: As Norway is important for the EU for security of supply, the EU is important for Norway for security of demand. We are interdependent!

The likelihood that Norwegian gas producers invest in transport infrastructure to expand gas exports to the European market is increased if they believe there is a demand to be met.

Today, I see little political attention regarding the future for gas. "Nobody talks about gas, everybody takes it for granted".

This uncertainty can reduce the benefit of investing in new pipelines connecting the Barents Sea to Europe, and instead make companies choose a market flexible LNG solution.

Well-functioning markets

As I mentioned, well-functioning energy markets is the second item on my wish list.

A well-functioning energy market is a precondition for efficient utilisation of the energy resources, security of supply, and a sustainable energy system in Europe.

Today, the European energy system is in a period of considerable transition. In order to succeed, we need to develop a market design to accommodate changes in the energy system.

More intermittent renewable production, changed consumer patterns, and increased expectations regarding security of supply and affordable energy prices are among the challenges ahead.

The EEA Agreement forms the basis for the EU-Norway cooperation in the development of our energy markets. We participate actively in the European processes and contribute to the development of an efficient European energy market, especially in our region.

In October last year, the Commission received Norway's response to the consultation on the initiative of a new electricity market design.

I would like to stress the importance of market-based solutions that provides efficient price signals to all participants.

We agree with the Commission that the energy prices should be the main driver for investments.

To achieve this, we must trust the price formation in the market, allow the prices to vary according to the market conditions, and enable all actors to respond to the price signals.

The market design should facilitate participation from all players, by providing non-discriminatory conditions and a level playing field. We believe that households, power intensive industries, generators and service providers should contribute to efficient utilisation of the resources, and minimise the need to introduce expensive capacity mechanisms.

To the extent that capacity mechanisms are necessary, it is important that introduction of such mechanisms do not distort the price signals in the energy market. When it can't be avoided, less market distortive solutions should be chosen.

Later, a second panel will discuss "The Nordic electricity market as a model of regional integration".

Today, the Nordic region have an advanced power market and a highly interconnected power system. A long history of close cooperation has been key to achieve this.

Cooperation between the Nordic governments, between regulators and between TSOs, has led to the development and integration of the market. It has also increased the cross-border transmission capacity and coordinated the system operation.

The cooperation has been voluntary, and based on trust and a common understanding of the mutual benefits from open cross-border trade.

Today, the Nordic market is highly integrated with the European market. I believe many of the principles of the Nordic model can inspire efficient market solutions and regional cooperation in Europe.

In November last year, my Nordic colleagues and I agreed to strengthen the cooperation on the development of the electricity market.

The further development of the European market will require pioneering work and new solutions.

The best way to achieve this is through close cooperation between system operators and between regulators within regions.

I therefore fully support the Commission's initiative of increased regional cooperation as an important  stepping-stone to a fully integrated European power market.

In line with this initiative, we will build on the existing Nordic cooperation in the further integration with Europe. The goal is to develop a well-functioning and integrated market, to the benefit of all – producers and consumers alike.

What we need to achieve this, is efficient regulation – not necessarily very detailed regulation.

Infrastructure

Well-functioning markets, where prices reflects scarcity, will also bring about investments in infrastructure.

Much has been done in order to improve energy infrastructure in Europe. This work must continue!

Norway is doing its part. We have built a gas pipeline system both to the UK and continental Europe.

Interconnectors to Denmark, Sweden, Finland and the Netherlands connect our power markets. New interconnectors to Germany and the UK will be in place in the coming years.

Conclusion

Let me come back to my two wishes for this "year of delivery": o First, a clear signal on the importance of gas in contributing to a sustainable energy mix in Europe. o Second, stronger efforts to achieve a common and efficient and well functioning energy market in Europe, supported by effective regulations and solid infrastructure.

Let us continue working together to make these wishes come true!

Together we can move forward in realising the Energy Union's main goal: A climate friendly, efficient and secure European energy system.

Norway wants our renewable energy and our gas to be an important part of this. We are ready to deliver - in this year of delivery, and in the decades ahead!

Thank you for your attention!