Tale i anledning NODE-konferansen

Arendal 18.august 2015

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Ladies and Gentlemen, dear friends of the Norwegian oil and gas industry. Thank you for inviting me back to beautiful Arendal.

Although I am from another part of the country, it is always a pleasure to visit the southernmost region - "Sørlandet". 

This is a region with a highly competent industry adapted to tough competition in global business.  

The activity level is high - across different industries. There are large investments in renewable energy, technological advancements in the process industry, and a highly competitive oil and gas service and supply industry that is adapting to a new market situation.

One big difference between Sørlandet and my own home-region is that you don’t really talk much about own achievements. According to the stereotype, the southerner is not like that. Even when successful, you won´t talk loud about your successes.

I believe you have reason to be proud. And, in spite of the current challenges in the oil and gas sector, I still think the future looks promising. 

Tougher times

At last year's conference, I talked about the need for addressing the high cost level in the oil and gas industry in order to increase profitability.

Since then we have witnessed a significant reduction in the oil price. We have seen a drop in the investment level on the NCS, reduced exploration activity, and projects being postponed.

This is not only happening on the NCS, oil companies and industry in all petroleum regions of the world are facing this new reality.

This means fewer contracts being awarded and downsizing of activities. The companies and people affected are experiencing challenging times.  

Nevertheless, I am confident about the long-term future of our industry. My impression after meeting some of you is that many share my optimism about the future. 

It is true that the investment level on the NCS will be lower in 2015 than in 2014; Still, it will be on a historically high level.

After more than forty years of production, the Norwegian continental shelf is still a vibrant petroleum province.

So far, less than half of the expected recoverable resources on the NCS have been produced.

Moreover, history has taught us that the oil and gas industry is cyclical. We must not forget that demand for oil is increasing. During the last 15 years, the consumption of oil has increased with about 15 million barrels per day, almost eight times the daily oil production on the Norwegian Continental Shelf. The current low oil prices fuel demand even further.

There is no doubt in my mind that long-term oil prices will increase. Together with cost-cutting efforts in the industry, this will make petroleum resources profitable.

We have been through tough times in this industry before. Historically, the industry has increased competitiveness as a result of cost cutting measures.

Technology and competence  

In challenging times, it is especially important to keep the long-term perspective in mind. We have to retain and develop competence within the industry, and continue our efforts in research and development.

The oil and gas industry is still by far Norway's most important industry, and one of the few areas where Norwegian technology is world leading. This is a position we must retain.  

The Government has in two consecutive state budgets strengthened support for research in the petroleum sector.

Allow me to mention one local example. In this year's Revised Budget we proposed granting 20 million kroner to the Mechatronics Innovation Lab.

Yesterday, I visited the University of Agder campus in Grimstad and met with people that are working at this lab. It is a collaboration between the university and the NODE cluster.

Historically, the strong partnership between academia and industry has been a critical factor for our success in developing a competitive oil and gas industry. I am confident that this partnership will secure the position of our industry, in particular here along our southern coast, as world leading within drilling and mechatronics.

I would also like to highlight the important work done by OG21 to address the challenges on the NCS.

On November 25th, OG21 will organize its annual Technology Forum in Oslo. The theme is: "The power of technology to boost productivity".

I hope to see many of you at the OG21 Forum. In 2016, OG21 will present a revised national strategy for R&D in the oil and gas sector. This forum is definitely the place to be if you would like to contribute in the discussions on the way forward.

New acreage  

The Government's main contribution to secure a stable and high activity level is awarding attractive new acreage.

At the end of January, I announced the 23rd licensing round. For the first time since 1994 we start exploration in new areas.

Opening up of the Barents Sea South East will allow the industry to grow further north, create new jobs and strengthen the economy – both in the county of Finnmark as well as nationally.

It also is important that the industry continue to succeed in developing new resources in our mature petroleum provinces. The discovery of Johan Sverdrup is an excellent example. 

Sverdrup  

I like to use Johan Sverdrup as an illustration of the possibilities that still exist on the NCS. Located in a mature area of the Northern Sea, the oil discovery later named the Johan Sverdrup field was the largest on the NCS since the 1980s.

Start of production is planned for 2019. Expected resources are between 1,7 and 3 billion barrels of oil, and the partners have an ambition for a recovery rate of 70 per cent!

This is by far Norway's largest industrial project and represent decades of value creation, jobs and huge revenues to the welfare state. To illustrate the long-term perspective: Sverdrup will offer work for two generations! 

I am pleased to see that during the last months, several Norwegian based companies have won important contracts in tough international competition.

For example, National Oilwell Varco, which I visited yesterday, and NYMO, have both won contracts for the drilling platform in the Johan Sverdrup project.

I am happy to see that the industry is meeting the dual challenge of high costs and low oil prices by focusing on efficient operations and standardization. 

This will increase profitability and competitiveness of the industry, as well as continuing to create great value to the society as a whole. 

I firmly believe we can look forward to several decades with high value creation from the petroleum sector, both in Norway but also at "Sørlandet".

The renewable energy industry at Sørlandet

Sørlandet is about much more than just oil and gas. This region is also an important producer of renewable energy, especially hydropower, and has been so for decades.

I have several times underlined the enormous importance of Norway's hydropower production, and especially our storage capacity.

We have a power system based almost 100 per cent on renewable, clean and affordable hydropower. Norway has therefore a share of more than 65 per cent of renewable energy in our energy consumption.

This is unique among industrialised nations and far above EU's target of 20 per cent by 2020.

In my view, these facts do not get the attention they deserve in our national energy debate.

One reason may be that we take our renewable resources for granted. The foundation of Norway as a hydropower nation actually happened more than 100 years ago, a long time before the term "green shift" entered the vocabulary.

Although the Norwegian hydropower sector is mature, there are still many new and exciting projects. Several plants that were developed decades ago are in need of upgrading.

Combined with new technological developments, and in some cases also utilising more of the available water resources, such projects can give additional production of renewable energy.

Yesterday, I visited Agder Energi which is the region's leading energy company as well as Norway's fourth largest power producer. They informed me about impressive plans for the years to come, despite the current low electricity prices.

Last year, I had the pleasure to attend the opening ceremonies of the Brokke and Skarg hydropower plants in Setesdalen.

Today, there are large new projects going on. Iveland is now being extended by building a new subterranean power station.

Furthermore, the water reservoirs of Nåvatn and Skjerkevatn in Åseral will become one reservoir. By replacing five older dams with two modern rock-fill dams, dam safety will also be increased.

These are two examples of large and complex projects depending on competence and innovative ways of designing new projects, even in what has been labelled a mature sector.

Some argue that the hydropower sector is conservative. My impression is that companies like Agder Energi through their project planning are thinking in a long-term perspective with the demands of the future in mind.

Hydropower has been, is and will continue to be our most important domestic energy source.

The industry

Historically development of hydropower development and powerintensive industry where interlinked.

Recently, the old power plants at Rjukan and Notodden received world heritage status and are now listed by UNESCO.

The power sector and the industry consumers still depend on each other.

The industry needs a stable and predictable supply at competitive prices. For the power sector, the demand from the industry plays a substantial part of the total demand.

Norway has vast experience developing industry in the vicinity of large hydropower resources. We also have a long history of developing world class technologies.

Through new investments and further development of these technologies, the industry will be able to increase profits, reduce energy consumption and reduce carbon emissions.

Last year, I visited Elkem Solar in Kristiansand. The plant uses hydropower-based electricity. Their own production process use only 25 per cent of the energy being used in the production of silisium in the traditional way.

We spend substantial public funds to develop new energy and climate technologies that will reduce energy consumption as well as climate footprint.

As an example, earlier this summer, Enova, granted 380 million kroner to support Glencore in Kristiansand as a contribution to a more energy efficient way of producing copper.

In total, more than a billion kroner will be invested in a new electrolysis facility that will make production even more climate-friendly.

Summing up

Ladies, and gentlemen, it is time to summarize.

In spite of the current challenges, I am optimistic about the future of the Norwegian oil and gas industry.

After 40 years of production, half of the resources still remain in the ground, ready to be produced.

Just before the summer holiday, we witnessed the official kick-start of the Johan Sverdrup-project at Kværner Verdal. I am impressed by how Norwegian industry has proven themselves to be competitive in the tendering process for that project.

I am also enthusiastic about the unique opportunities for Norway to further develop our fantastic renewable energy resources. This will be of benefit to the industry, private consumers as well as the climate.

Sam Eyde was born in Arendal, and founded what was then called Kristiansand Nikkelraffineriverk - now Glencore.

He was also a pioneer in securing ownership to hydropower in the 1890s and developed these green energy resources in a way that led to the establishment of major Norwegian industrial companies like Norsk Hydro and Elkem.

Competence and knowledge from these industries were vital when we embarked on our oil and gas adventure half a century ago.

Eyde acted as a long-term investor and had a clear view about what the future would hold. I think he should serve as an inspiration for all of us.

I believe that Sørlandet will continue to be a leading region within industry based on both oil and gas as well as renewable energy resources.   Thank you for your attention!