Interaction in the Energy Sector

Check against delivery

Excellencies, ladies and gentlemen,

I am very pleased to be here in Astana on the occasion of the official opening of the Norwegian embassy in Kazakhstan. Let this be an expression of both friendship and interest, and a reflection of the importance that the Norwegian Government attaches to our relations with Kazakhstan.

We have fond memories of President Nazarbajev's visit to Norway in 2001 – PM Bondevik's visit in 2004 and several follow up visits.  

It is the first time I visit your country – though in my youth I used to travel here in my imagination, to set world records on the ever famous Medeo speed skating rink. I will also take this opportunity to pay tribute to your countryman and cross country skier Vladimir Smirnov – who won Kazakhstan’s first ever Olympic gold medal, at the Lillehammer Olympic Games in Norway in 1994. He is among the finest ambassadors to this sport we have ever had – as well as to Norwegian-Kazakh relations. His was perhaps the most popular of all medals won at the Lillehammer Games, and to see him being cheered on by a hundred thousand Norwegian fans along the trails is something my countrymen will always remember.    

With today’s opening of the Norwegian embassy, and a Kazakh embassy already well established in Oslo, I believe we have a solid foundation for further strengthening our relations. I also find it appropriate that we start our official programme in Kazakhstan with an energy seminar, as energy is a key factor in our bilateral relations.

Against this backdrop I believe it is high time that we increase our political contacts. There are plenty of reasons. One is of course that outward-looking countries in today’s world need to meet, to get to know each other, to explore opportunities for cooperation and common responsibility, and – when necessary – to deal with differences.

Another reason is the key role that Kazakhstan plays both within the Eurasian region, and – increasingly – at the global level. With the development of your rich energy resources, you are an important contributor to global energy security.

Situated at the crossroads between Europe and Asia, you have a highly strategic position, between countries like Russia and China. Your neighbourhood is not without its challenges, as with Afghanistan on your southern border.

Kazakhstan is playing a significant role in terms of security policy through valuable work on nuclear disarmament and non-proliferation. By voluntarily giving up your nuclear weapons and joining the NPT as a non-nuclear weapons state, Kazakhstan serves as an important example to the rest of the world.

And before I move on to what will be the main focus of my speech, I would like to congratulate Kazakhstan on taking over the OSCE Chairmanship for 2010. With the backdrop that I have just mentioned, and with your long history and tradition of peaceful coexistence of different peoples and religions, I believe it is very timely that Kazakhstan takes on this role. I assure you that the Norwegian government stands ready to support you in this important endeavour.

The OSCE Chairmanship gives Kazakhstan a unique opportunity to strengthen democracy and enhance stability across the region. I also believe that this will be a good opportunity to increase the role of the Eurasian countries in the OSCE.

It is the interaction between Kazakhstan and Norway in the energy sector that is our focus here today. For the last four decades, oil and gas have been Norway’s most important economic resource, and Norway’s most visible footprint outside its borders. I belive that the way we have managed our exports of oil and gas has earned us a reputation as a reliable supplier of energy – both to Europe and globally. This remains our most important contribution to global energy security. And the way we have managed distribution and investment of income from natural resources may also offer a lesson to other energy rich nations – such as Kazakhstan.

Norway is now the sixth largest oil exporter in the world, the second largest gas exporter, and the sixth largest producer of hydropower. Meeting 18% of Europe’s gas demand (and around 30% of its gas import), we are the second largest supplier of natural gas to Europe after Russia.

Now that Kazakhstan is increasingly developing its significant oil and gas resources, you are becoming increasingly important to world energy markets and global energy security. With the largest recoverable crude oil reserves in the Caspian region, and with sufficient export options, Kazakhstan could become a major world energy producer and exporter over the next decade. This is a development we follow with great interest.

In both our countries, the hydrocarbon industry accounts for a lion’s share of our revenue. In Norway, the petroleum sector now accounts for a quarter of our gross domestic product, half of our total exports, a third of total government income and a quarter of total investments.

As major producers and exporters of fossil fuels, the threat of climate change and the increasing demand for energy represents a dilemma for Norway and for Kazakhstan. At the same time, this is a global dilemma, and not just for producers, but also for consumers. 

Both national and global efforts are needed. Kazakhstans ratification of the Kyoto Protocol is a significant achievement in that regard. The Copenhagen Accord is an important first step in our common efforts towards a truly global agreement.

Given the importance of the energy sector to the national economy, it is key for countries like ours to manage these resources in an environmentally sustainable way that generates long-term economic growth and promotes the welfare of the entire population.

Sudden large inflows of revenue from natural resources is a blessing if managed wisely. But there are also numerous examples where natural resources have proven to be a curse. We know that in order to translate revenues into real riches, i.e. into improvements in the lives of the many, a country must have high ambitions for social investment and income distribution.

For Norway, the petroleum industry has given us a unique opportunity to develop a strong welfare system.

An important step was the establishment of our petroleum fund, called The Norwegian Government Pension Fund – Global. This is today one of the world’s largest sovereign wealth funds with assets of around USD 450 billion. Its purpose is to help the Government meet the rapid rise in public pension expenditure in the coming years, and to support long-term management of petroleum revenues. The fund invests globally, and some of it – although still on a modest level – is invested in Kazakhstan. I know that Kazakhstan established a similar fund a few years ago in order to ensure lasting benefits from the oil revenues.

Sound management of natural resources is crucial, not only to ensure sustainable development for current and future generations, but also to attract foreign investments.

The Norwegian way of developing the oil and gas industry is characterised by a high degree of national control and state ownership combined with competition by international oil companies. It is based on collaboration between independent oil and gas companies, government agencies, universities and research institutions.

Throughout the 40 years of petroleum activities on the Norwegian continental shelf, close dialogue between industry, government and trade unions has played a vital role in ensuring good planning processes, decisions and solutions. This has again been important for the development of Norwegian expertise and a highly competitive, high-tech supply industry. You can see an example of this here in Kazakhstan, where the Norwegian company Aker is taking part in the development of the Kashagan field. And then there is Statoil – with a presence here since many years – ready and able to engage with KazMunai to develop new opportunities – we truly support this endeavour and hope that a strategic partnership will be developed.   

We have combined participation of international companies with a strong focus on national control over our natural resources and value creation. This has benefited both the development of the petroleum sector and the development of the Norwegian society at large. 

Our approach has kept the industry in the driving seat when it comes to commercial decisions, with the government setting efficient framework conditions.

Norway is keen to work with the Kazakh Government and business sector in supporting the development in Kazakhstan. I am certain that Norwegian companies can be a driving force for an exciting relationship. Some of them are here today, eager to engage in Kazakhstan on the basis of their expertise, investments and experience.

Why are business relations so important? Because when companies with different experience interact, there is potential for more value creation than would have been the case if they had worked in isolation. And this is my main message here today. Our two countries will benifit from exhanging experiences. Through our own experience we have developed expertise and know-how. And this know-how may be useful for development here in Kazakhstan.

Wherever they operate, Norwegian companies are expected to demonstrate corporate social responsibility (CSR). Let me share with you a few thoughts about the Norwegian Government’s approach to CSR.

Earlier this year, my Government presented a White paper on CSR to the Norwegian parliament, setting out a comprehensive approach to this policy area. The paper was developed in close cooperation with the social partners. Through this tripartite dialogue – between authorities, industry and civil society – we have put corporate social responsibility at the heart of our business’ code of conduct.

A number of leading Norwegian companies, including those present here in Kazakhstan, have integrated CSR into their operations and decision-making processes. They seek to safeguard not only their economic interests, but also the interests of the country they are operating in – at both local and national level – by engaging in various beneficial projects – with local content – developing local capacities and capabilities.

Another factor that is relevant in this context is corruption. The Norwegian Government expects Norwegian companies to refuse to accept corruption anywhere in the world. Companies headquartered in Norway must comply with Norwegian anti-corruption legislation as well as the legislation of the host country.

It is encouraging to see that Kazakhstan is seeking to make its petroleum fully transparent through its engagement in the Extractive Industries Transparency Initiative (EITI). I would like to commend Kazakhstan on these efforts, and I understand that you are approaching the end of your validation process.

Norway for its part is currently implementing the EITI criteria. We believe that they are crucial for combating corruption and bringing full openness into the extractive industry.

In conclusion, Norwegian companies’ experience can be of particular value to the development of the Kazakh energy sector on the following four points:

• First, their extensive expertise, technology and management experience from 40 successful years of oil and gas recovery on the Norwegian continental shelf.
• Second, their experience of long-term cooperation with host country partners and subcontractors in order to optimise local content and contribute to economic growth.
• Third, their experience of effective clean-up of waste and addressing environmental impact.
• And fourth, their experience of cooperation with regard to how and why CSR matters, including valuable input from trade unions and civil society.

We have high hopes for future cooperation between Norway and Kazakhstan, and I believe that Norwegian companies can play a key role.

As I have mentioned, Norway would be happy to continue to share our experience in the energy sector. We are very pleased that the bilateral energy group will meet later today, headed by our two countries’ deputy energy ministers.

I look forward to an ever closer dialogue with the Government of Kazakhstan on these and many other issues. Thank you.