Energy security: A common concern

Ladies and gentlemen

I appreciate this opportunity to address such a distinguished audience from both allied and partner nations. In order to adapt to a new geopolitical situation and to be able to respond to new challenges, NATO has during the last years established different kinds of partnership and cooperation arrangements with many nations. This has enhanced our overall ability to deal with a broader range of security issues.

Within a very short time frame, energy security issues, and in particular concerns regarding future oil and gas supplies, have become important focuses in the ongoing security policy debate. During the last couple of years several incidents have demonstrated the strategic importance of energy. Especially the Russian shut down of the gas pipelines to, and through, Ukraine, that also affected many other European countries, effectively pushed energy security on the top of the security policy agenda.

The energy area is a complex, challenging and multi- faceted topic including aspects ranging from global warming, the diversification of energy supplies, the use of oil and gas for political leverage to the equitable distribution of the wealth stemming from oil- and gas- production. Energy security concerns all of us, both member and partner countries.

In my address I will focus on some of the common global concerns and challenges related to the energy issue, on the possible role of NATO and of national defence forces in relation to energy security, and finally on the more regional perspective - the developments in the High North and Norway’s role and responsibility as an oil and gas producing nation.

Our common concerns and challenges
Energy crises and energy scarcity are not new phenomena. Globally, there have been several oil crises over the last decades. These past crises have most often been politically motivated and of temporary nature. Consequently we have only to a limited extent been able to draw lessons from them, or take corrective measures to avoid future repetitions.

Future energy crises will most likely also have political overtones. Now, however, we are facing a new situation due to the growing discrepancy between supply and demand, which will probably become a major structural problem in the not too distant future.  Forecasts by the International Energy Agency (IEA) predict that without preventive measures, global oil demand will increase by around 40% by 2030. Europe, the US and emerging industrial nations such as India and China, have become gradually more focused on achieving assured supply of energy.

The fact that future oil and gas supplies are becoming more geographically concentrated only adds to the general concern. By 2025 approximately one third of the world’s oil production will come from what is considered as potentially volatile regions.

Today’s market is characterized by a lack of resilience and robustness, and even small disturbances have proven to have immediate effects on the global price of energy. This situation makes us all vulnerable to actors who want to use energy supply as political leverage. At national and regional levels we also should take into consideration the possibility of terrorist attacks against critical energy infrastructure with the intent of destabilizing economies.

From a demand-driven perspective, diversification of energy supplies is increasingly important in order to enhance the resilience of the market. As a part of diversification, the major western consumer and industrial economies in the west will also inevitably have to invest more into alternative sources of energy.

On the other hand there is also a dimension related to security of demand. Development of new oil- and gas fields, at least offshore and in remote land areas, normally requires heavy financial investments over several years. The producers therefore need to be fairly sure that there will be a lasting demand for their products in the future. Consequently, long term agreements between buyer and seller might become a prerequisite for future development of new areas for oil- and gas production. This underlines the aspect of interdependence between producer and consumer.

In addition, to encourage investments in new oil and gas fields, the producers have to be offered predictable conditions when it comes to legal framework, taxation etc.
Climate changes have also become a global political priority. Energy security and climate change are more and more regarded as twin challenges. In a longer term perspective, an intensive and systematic search for alternative energy sources is vital to reduce the dependence of fossil energy as well as to satisfy the increasing global demand for energy. However, in a short term perspective it seems quite clear that the world will have to produce more fossil fuel before it makes do with less. The development of more efficient technology to reduce the carbon dioxide emissions and to capture green house gasses is therefore extremely important, and should be given even higher priority than today.

The challenges described above require a broad international approach, addressing the specific interests of both suppliers and consumers. Such an approach must as its starting point purport that the global energy sector is and should be part of an open market economy.

At the same time the increasing security dimension of energy underlines the need for a free energy market to be underpinned by international cooperation and common guidelines and rules. Such intensified cooperation should cover all aspects of energy security and be carried out especially within the framework of organizations such as IEA and OPEC.

The EU has also energy security, and especially sufficient and reliable supply of energy on the top of its agenda. This is reflected in the Reform Treaty that was agreed in principle at the EU meeting in Lisbon earlier this month. In the treaty it is proposed to introduce a kind of solidarity arrangement among EU-members in order to support each other “if severe difficulties should arise in supply of certain products, notably in the area of energy” (article 100).

Physical protection of all relevant infrastructures will be an increasingly important aspect of energy security. The primary responsibility for national infrastructure will always lie with the individual nations. However, increased physical protection against terror and attacks must be addressed both in a national and international context, including in NATO.

Energy security - the role of NATO
Obviously, the Alliance has a share and a role to play related to the energy security issue, as well as to a number of other issues high on the international agenda. For decades, NATO has recognized the strategic importance of energy, as evidenced by the operation and protection of the NATO Pipeline system. In the strategic concept from 1991 the “disruption of the flow of vital resources” is mentioned as a part of “risks of a wider nature”. This point is repeated in the concept from 1999. The recent focus on energy security has spurred new internal consultations and an exchange of views on energy security. At the same time, these discussions have demonstrated that member countries harbor different views regarding NATO’s overall role within this area.

In my view NATO should never intervene in matters related to energy markets and prices as such. The Alliance should not try to influence upon processes related to member countries’ sales or purchases of energy. This is strictly a seller-buyer relationship which is clearly beyond the Alliance’s area of competence. As mentioned before, such issues should be dealt with by more appropriate organizations.

At the same time it is quite clear that the energy issue, including sufficient and reliable supply of energy, could influence a nation’s security. According to article 4 in the Washington Treaty a member country can put forward to the Council for discussion any issue regarding threats to its national security. Therefore we should, as a matter of principle, avoid excluding any potential security issue from debate in the NATO Council. Consequently, the discussion whether the Council should discuss a specific issue concerning, for example, reduced supply of energy, ought to be postponed until such an issue is actually put on the agenda.

There seems to be a fairly broad agreement within the Alliance regarding NATO’s role in protecting energy related infrastructure on the territory of member states. However, I find it somewhat difficult to understand why this question in particular needs to be given more attention or addressed more thoroughly than other types of national infrastructure that need protection. As long as the reasons and circumstances for requesting support from NATO are considered relevant, the question of what kind of object that needs protection should be of less importance. This would not in anyway change the fact that it first and foremost is a national responsibility to protect energy related infrastructure, as it is to protect other kind of national infrastructure or national territory as such.

A more complicated situation may arise if a member nation’s energy related infrastructure or transportation means are attacked in international waters. More precisely to what extent and how NATO should play a role in such scenario, needs to be discussed further within the Alliance. Closely attached to this matter is the question of protection of international sea lines of communication and surveillance and patrolling of international waters and straits. The MC 401 describes the role of NATO in protecting oil and gas installations in the North Sea in case of an armed attack, and should be one of the elements in the further discussions on this issue.

Further, outreach activities directed towards partner countries, including capacity building, defence reform and training, could contribute to improvements in protection of energy infrastructure in these countries. PfP-countries can also ask for consultations with NATO should they perceive a direct threat to their security.

Risk assessment and intelligence fusion and sharing are other areas where NATO has a long experience, and could provide knowledge and support. In the future these activities could comprise matters related to energy security.

The Alliance also could provide support to national consequence management following energy related civilian incidents as disasters and major accidents.

Energy security – the role of the national defence forces
It goes without saying that the use of national defence forces has little relevance to many aspects of energy security. There are however some areas where the defence forces could play an important role. First, they play a key role through their overall responsibility to protect national territory, including infrastructure. In this respect energy related infrastructure does not differ from other kinds of national infrastructure. This role could in principle include all parts of the defence forces.

In most countries today, a terrorist attack against oil and gas installations is perceived as far more probable than the threat of broad scale military attack. In Norway, for example, the police and the justice sector will have the overall responsibility for handling terrorism in this field. They will, however, rely heavily on specific military capacities which have been particularly trained to deal with this kind of situations, especially incidents on offshore installations.

Secondly, maritime surveillance and patrolling is essential to maintaining current overviews and to secure stability and predictability in waters of national jurisdiction, especially in oceans area containing strategic resources. This would in many cases be a task for the military forces in the country concerned. As I mentioned earlier, maritime surveillance and patrolling could also be possible tasks for NATO.

Thirdly, to prevent occurrence of terrorist attacks against energy related infrastructure from taking place, current and reliable intelligence is important. Depending on individual national arrangements, such intelligence could be provided both by military and police sources. Nevertheless, in this field close cooperation both between different sectors at the national level and between countries is required. Also in this regard there is a connection to a possible role for NATO.

Challenges in the High North
I would now like to turn your attention to the High North. The High North has changed from an area of potential confrontation to an area of cooperation, particularly when it comes to oil and gas. The military dimension, which was prevalent during the Cold War period has receded into the background, but has not disappeared.

The High North is a key priority for my Government, and is a broad concept, both geographically and politically. It is an integral part both of our overall foreign and domestic policy. Predictability, a long term perspective, active dialogue and constructive cooperation are driving elements in our High North strategy.

A productive relationship with Russia is essential in the High North. In order to meet many of our current challenges, we need an active engagement from the Russian side. Russia is a country in transition, and today we are facing a stronger and more self-assertive Russia than just a few years back. As a result of an improved Russian economy, a strengthening of their military forces is now taking place. The recent steep increase in the number of Russian fighter planes along the Norwegian coast indicates a more visible future Russian military presence in the area. We do not consider these activities as directed against Norway in particular, and they have no immediate influence on our bilateral relationship.

Higher energy prices have made the High North economically interesting for exploitation of petroleum resources. Global warming contribute to making this area even more attractive, as the melting of the ice and the tundra gives access to new areas for exploitation and to alternative routes for transportation of petroleum products to the major markets.

An earlier estimate from the United States Geological Survey indicated that 25% of undiscovered petroleum resources could be located in the circumpolar Arctic.  This is, however, only an estimate, and it remains to be seen what resources the arctic seabed is actually hiding. Recent tests might indicate that the “25%- estimate” is slightly exaggerated. Even though the European High North, as a part of the Artic might become very important in an energy context, it can not by any means replace the Middle East as the major source of oil and gas.

Nonetheless, from a global energy perspective the relative importance of the Barents region as an energy province is growing. There is a dominance of gas in the artic region, as illustrated by the discovery of the world’s largest known offshore deposits, the Russian gas field named Stockman. It is located in the Barents Sea 500 kilometers north of Murmansk. In the Norwegian part of the Barents Sea, offshore development has already started. The first deliveries of liquid natural gas (LNG) are about to be transported by ship to markets in Europe and in the United States”. In the near future a growing part of the world’s gas supplies will come from the High North. This will, no doubt, greatly increase the strategic importance of the region in general.

In contrast to many other energy provinces in the world, the Barents Sea region is politically calm and stable. Continued stability is in the interest of all parties involved, as a precondition for economic development and cooperation. We will make it our priority to keep it that way.

However, there are also challenges. Increased strategic importance makes the High North more exposed and vulnerable with regard to changes in the international security in general. This could make the region more easily influenced by developments in other parts of the world which are not directly linked to the High North.

There are several unsettled jurisdictional issues in the High North. After thirty years of bilateral negotiations, Norway and Russia have still not reached a final agreement on the delineation of the maritime border in the Barents Sea. Nevertheless, the bilateral consultations have progressed during the last couple of years, and recently an agreement was reached on a demarcation line in the area that is situated closest to the coast. There is expected to be petroleum resources in the disputed area.

Another issue is related to the continental shelf beyond 200 nautical miles in the North-East Atlantic and the Arctic Ocean. As a part of a process embedded in the Convention on the Law of the Sea, Norway has put forward to the Continental Shelf Commission documentation to confirm that the entire sea-bed in the Barents Sea beyond 200 nautical miles is continental shelf, and that the Norwegian continental shelf also stretches more than 200 nautical miles north of Svalbard. The Norwegian submission, which was presented in close coordination with our neighbouring States, also covers the area beyond 200 miles in the Norwegian Sea. The full oil and gas potential of the Norwegian continental shelf in the High North has yet to be assessed.

As this process proceeds, it may result in overlapping continental shelf claims in the Artic Ocean, and thereby harbor potential conflict in the region in a long term perspective. This may further complicate the other challenges related to energy exploration in the region. A clear boundary is vital – also between good neighbors.

Further, the eco systems of the High North are very fragile, and large spill-outs could have very grave and long lasting consequences. As part of a sustainable overall policy in the North, oil and gas exploration must be balanced against the need to protect and preserve the environment. If properly managed, the large fish stocks in the area will provide food for generations.

When operating in the Artic the oil and gas companies have to comply with very strict regulations to avoid spill-outs. Oil and gas production will furthermore lead to increase in sea transport, and thereby also an increased risk for shipping accidents in this area. Therefore it is vital to establish prevention measures as well as effective procedures and immediate action plans for handling spill outs from ships should an accident occur.

Norway’s role and position as an oil and gas producing country
Norway has an oil production of three million barrels per day and an annual gas production of 85 billion cubic meters. At the beginning of the next decade, our gas exports will have risen by 50 percent, to around 130 billion cubic meters. This means that our gas exports at that point will be equivalent to the volume that Russia supplies to Europe and will account for nearly a third of the natural gas consumption of France, Germany and the United Kingdom. We have the technology to harvest and manage these resources.

As a large oil and gas producing country, Norway has a clear responsibility to promote international rules and arrangements that contribute to stable supply and environmentally safe production and transportation of oil and gas. We also have a responsibility to carry out research and develop alternative energy resources as well as new technology to curb and clean the emissions from the exploitation and use of fossil energy.

On a national level it has been important to secure a fair distribution of the wealth stemming from the oil and gas production on the Norwegian continental shelf. Through careful taxation and through the establishment of an appropriate legal framework, we have succeeded in reserving a substantial part of the oil and gas revenues for the benefit of Norwegian citizens.

When StatoilHydro expands internationally, it will undoubtedly being perceived as Norway’s national oil and gas company, even though it is an independent commercial enterprise. To us, it is therefore important that the company’s international activities are conducted in accordance with the overall political guidelines and legal regulations that govern its domestic operations. At the same time we have to be crystal clear about roles and responsibilities, distinguishing the politics of energy from the business of energy.

Obviously, StatoilHydro has to comply with laws and regulations of the specific country where it establishes its operations. Further, the company should generally promote environmental, economic and social development wherever it operates. In my opinion the multinational oil and gas companies must acknowledge that they have a certain responsibility to contribute to the development of society and good governance in countries where they conduct business, particularly in lesser developed countries with fragile government structures.

Norway has adopted very high environmental standards for the activities within the oil and gas sector in the High North. High priority will be given to securing both the production and distribution facilities. We hope that the Norwegian regulations in this field will serve as a general standard for further development in the High North.
Norwegian oil and gas supplies are of strategic importance to other states, and tie significant Norwegian interests to developments in the global energy sector and to the interest of other states. This is reflected in the overall Norwegian attitude towards the role of energy security. Norway will continue to be a stable and reliable supplier of oil and gas based on the principle of a free market and our supply capacity.

Regarding the High North, we will seek to develop the energy resources in the area within a transparent, multilateral framework, and in accordance with international law. We will continue to emphasize predictability, stability and transparency in the future development of the Norwegian part of the High North, and we would like to underline the need for continued cooperation in order so secure continued safe access to energy in the future.