The Norwegian perspective on Arctic resource development and management

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Introduction

Lysark 1: Tittelside

• Pleased to be here. The first ever ONS Summit – addressing three key regions and groups of nations of paramount importance to international energy and climate developments: MENA, BRICS and the Arctic. Intrigued and curious to learn more about your concept of a new, high-level platform for discussion and the exchange of experience and information.
• The summit adds to the well-established Offshore Northern Seas (ONS) exhibition, conference and festival, which are opening tomorrow. For the next few days Stavanger will be the meeting place for the oil and gas industry. ONS will be a source of motivation and inspiration.
• Main topic this year is "confronting energy paradoxes". Entails understanding and grasping the opportunities and at the same time handling the challenges associated with the need for energy.
• Today's focus on resource management in the Arctic. Or, "The vanishing north" as The Economist wrote in its special report on the Arctic in June. The paper added: "There are benefits in the melting of the Arctic, but the risks are much greater". Is that true? And, if so – are the risks manageable?

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I My point of departure

Lysark 2: Nordkalotten sett ovenfra

• Energy and energy security plays a key role in a modern foreign policy. Energy meets both the past and the future.
• Also a natural topic for discussion when I received my German counterpart last Saturday.
• But this time we did not go offshore like we usually do. This time we went inland - by helicopter to see the Blue Lake and the hydro power plant at Saurdal. We talk about renewable energy and expanded electricity grid to Europe. New cable to Germany by 2018 and to the UK by 2020.
• Already considerable industrial activity in the Arctic. Still undiscovered resources of economic interest that are estimated to be vast.
• The world needs more energy. Energy consumption will increase – this is essential for development and for bringing millions of people out of poverty.
• At the same time: We need to produce and use energy in a more climate friendly and sustainable manner.
• It's a paradox that the massive use of fossil fuels over the last 100 years has resulted in increased access to more fossil resources. This is a paradox we must handle.
• Norway is a major energy and climate player in the High North – a region on its way to becoming a new geopolitical centre of gravity.Last autumn I presented my Government's white paper on our High North policy. Why did we make the High North a priority for our foreign policy?

Three main drivers

• Climate change globally and in the Arctic in particular. Most visible place to observe climate change.
• Developments in Russia, our neighbour to the east and a major, Arctic nation. Increased border crossings: Up from 4000 in 1990 to 200 000 in 2012.
• The potential for resources and economic activity – petroleum and minerals and not least fish (renewables!). New transport routes.

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II What characterises the High North/the Arctic today?

• Legal framework: The Law of the Sea provides the legal framework for all activities in the Arctic Ocean - an ocean surrounded by land. (In contrast to Antarctica - land surrounded by ocean).
• In the Ilulissat Declaration (28 May 2008 in Greenland) the five coastal states bordering the Arctic Ocean – the US, Russia, Canada, Norway and Denmark/Greenland – affirmed their continued commitment to the legal framework in the Arctic Ocean.

Lysark 3: Undertegningen av delelinjeavtalen

• Only a few cases of disputed or potentially contested borders. Norwegian experience: After 40 years of negotiations we concluded an agreement on maritime delimitation with Russia last year.
• Most of the resources in the Arctic are to be found within areas of national jurisdiction, within the 200-mile economic zones and the continental shelves of the coastal states.
• Major and rapid climate change. Geography is changing (due to climate change) – even though we cannot change geography.
• The most obvious signs of this are the melting glaciers on Greenland and the shrinking Arctic ice cap. According to recent estimates (National Snow & Ice Data Center in Colorado) the extent of the Arctic sea ice during the first two weeks of August continued to track below the lowest recorded daily ice extent for 2007. With about five weeks still remaining of the melt season, we could see a new record low ice extent this summer.
• Great variations within the region. While the Arctic Ocean is opening up and facilitating access to new areas, the permafrost is thawing and complicating logistics on land. Some areas are populated, partly by indigenous people, who have special status and rights.

III What will be the main developments in the High North/the Arctic in the next 20 years?

Lysark 4: Energiressurser i Arktis - USGS

Let me outline some key visions put forward in our White Paper. Trends that we believe answer that question:

1. A new global energy region is developing. The US Geological Survey suggests that as much as 22 % of the world's undiscovered petroleum resources could be found in the Arctic. It is likely to be a key source of future European energy security. The energy dimension will become the most important driver of increased interest in the High North in both political and business circles globally.
2. A new industrial age in the north. Increased interest in strategically important minerals. Parts of Norway, Finland, Sweden and western Russia make up one of the most promising regions for minerals in Europe. Requires both Nordic and Barents cooperation. Develop East-West transport routes (Kiruna-Narvik mineral railway)
3. The growing interest in the Arctic Ocean.(Some 40 % reduction in sailing time from Yokohama to Rotterdam compared with the Suez route. Increased number of sailings – 41 transits in 2011 – through the North-East Passage. It is the high season for sailings right now. Both the number of transits and total tonnage are expected to increase considerably in 2012. (In comparison 18 000 ships pass through the Suez Canal). Still plenty of challenges to the North East Passage (harsh weather conditions, darkness, cold, ice etc.).
4. Pioneering work on integrated marine management. (Northeast Arctic cod the best managed fish stock in the world. Norwegian–Russian ecosystem-based fishery management in the Barents Sea.) Marine bio prospecting. 10 000 of species at great debt. Just some 10 % we have knowledge about.
5. Global source of knowledge about the environment and climate change. Increased understanding of climate change globally. Vulnerable environment requires special attention to ensure sustainable development. That's why Norway invests in Tromsø as a centre for Arctic climate and environmental research.
6. Close and innovative cooperation in the High North. The Arctic Council an agenda-setting body. Establishing its permanent secretariat in Tromsø. Arctic Council from policy shaping to policy making body.
7. New geopolitical centre of gravity in the High North. (From Cold War logic and inaccessibility to extensive international cooperation and accessibility to resources and shipping routes. Still military strategic interest in the region and military exercises. Russian fleet. NATO presence. Core areas). Aim: High North – low tension. In the High North we see both old and new features. Much of the High North debate is based on Cold War images that are not relevant anymore.

IV Petroleum activity in the Arctic parts of Norway

Lysark 5: Sokkelkart med delelinjen og noen lete/produksjonsfelt indikert

• Norway has produced oil and gas for 40 years. The world's 2nd largest gas exporter today. We supply 35% of the EU imports of natural gas and 20% of EU consumption.
• Norway will continue to be a reliable and stable energy producer for decades to come. Recent discoveries on the Norwegian continental shelf have confirmed the availability of resources.
• Expanded grid connections between the Nordic countries and sub-sea interconnectors to the Netherlands, Germany and UK allow more countries to benefit from the extensive Norwegian hydropower system. Oil and gas as well as renewable energy. All this contributes to improved energy security in Europe.
• The Barents Sea is likely to become an important European energy region. How rapidly it develops will depend on market conditions, technological developments, and the size of any commercially viable discovery of oil and gas.
• The Norwegian oil and gas industry is moving northwards. There is a vast acreage waiting to be explored. 72 of 86 blocks announced in the ongoing 22th licensing round are located in the Barents Sea. We are already seeing the increased interest in terms of the presence of major companies(Aker Solutions to Tromsø. ENI in Hammerfest).
• Geological surveys under way in the previously disputed areas – the Government's aim is to propose that the eastern parts of the Barents Sea South are opened to petroleum activity in 2013.
• The Norwegian oil and gas industry already has a foothold in the Arctic parts of Norway: Snøhvit and Melkøya – subsea production 150 km offshore, processing LNG onshore. Goliat – floating platform due to start production of oil in 2014.
• The maritime delimitation treaty with Russia includes provisions on cooperation on exploitation of transboundary deposits.
• New discoveries and technology may lead to the development of new infrastructure in the future. This will depend on the resources available and commercial considerations.
• Increased oil and gas activities in the Arctic must also be weighed up against considerations of other industries and interests within the framework of integrated, ecosystem-based management.

V Producing fossil fuels and combating climate change. Challenges we have to face.

Lysark 6: Isfjell i Arktis

• Our natural resources have given us advantages. Also fully aware of the obligations we have as a significant petroleum exporter.
• I would like to focus for a moment on the title of this year's ONS conference: "Confronting energy paradoxes". The main paradox we are facing is that our need to meet the world's growing energy needs seems to conflict with our need to achieve sustainability and combat climate change.
• On the one hand – the world is in need of energy. Energy production will continue to be carbon-based for some decades to come. Energy is crucial to development and to bringing people out of poverty. Essential to develop renewable energy sources and improve energy efficiency. Still – the world will depend on fossil fuels for a long time to come.
• On the other hand – greenhouse gas emissions must be reduced considerably if we are to address climate change in a responsible manner. The message from the Intergovernmental Panel on Climate Change (IPCC)and others is clear: If we are to limit the average global temperature increase to 2 degrees Celsius, the transition to a low carbon society must be speeded up.
• To some, the answer is to limit the production of fossil fuels and to refrain from developing promising energy regions, such as the Arctic (Greenpeace demonstrating outside). At first glance, there is certain logic to this. By reducing the availability of oil and gas, as well as coal, the emissions from burning fossil fuels could diminish. Some studies indicate that known reserves are five times bigger than the amount of carbon that we actually can use over the next years and still meet the 2 degrees target.
• However, introducing restrictions unilaterally in Norway or in a particular region of the world, would probably have limited, or possibly even the opposite effect; In a world with increasing demand for energy, I believe imposing such restrictions could result in energy substitution of the wrong kind, with coal and heavy oil replacing natural gas.
• My point is – yes, we are facing a paradox. It is not a national or regional paradox, but a global one. We must increase our capacity to deal with challenges to economic activity.
• So, how should we deal with it? Let me suggest some possible approaches:
• Firstly - we need to develop international measures and instruments that enable us to effectively deal with climate change, so that our efforts can yield maximum results. The international community is making some progress, but we still have a long way to go. High priority for Norway.
• Secondly - we should continuously seek to reduce the environmental footprint from the production and use of fossil fuels. The carbon intensity associated with petroleum activity must be reduced. On the Norwegian continental shelf, an increasing number of petroleum installations are being supplied with electricity from onshore hydropower facilities. The prohibition of gas flaring and the CO2 taxation on the Norwegian continental shelf are examples of regulations that have prompted industry to develop innovative, cleaner technological solutions. Oil companies have a special responsibility to improve efficiency and find smarter, cleaner technological solutions. I believe this is also in your own interests?
• Let me add: Limiting gas flaring in the Arctic has a special value: Emission of short-lived climate pollutants such as black carbon, methane and tropospheric ozone, contributes considerably to warming of the Arctic. Furthermore, when black carbon (soot) covers snow and ice, melting is accelerated. Concerted efforts can make a real impact in a short space of time. There is already increased awareness and several promising projects are under way (ref. US-Norway cooperation – Clinton's visit in June). An issue we must deal with when developing petroleum activity in the Arctic.

Lysark 7: Mongstad – CCS

• Thirdly – Norway is committed to making carbon capture and storage (CCS) a realistic option in the future. As part of this massive effort, an advanced CCS Technology Centre opened at Mongstad outside Bergen in May. Knowledge acquired at the centre will complement 15 years of CO2 storage experience in the North Sea.
• Fourthly – I mentioned energy substitution earlier. The share of renewable energy is growing, but it still only accounts for 3-4 % of the world's energy consumption. While we work on developing more renewable energy and improving energy efficiency, emission reductions can be achieved rapidly by replacing coal with natural gas. In Europe the use of gas is expected to increase, however the political signals and market conditions are ambiguous. Gas is bridging renewable energy and coal.

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VI What do we need to do to achieve our goals?

Lysark 8: Framsenteret i Tromsø

• We need more and deeper knowledge of the Arctic in order to fully understand the challenges ahead and enable us to make the right decisions.
• Together with the Minister of Petroleum and Energy, Mr Ola Borten Moe, I have recently decided to establish a research and competence centre, focusing on challenges related to petroleum activities in Arctic environments. The centre will be based in the north of Norway and will collaborate with leading research communities in Norway and abroad. The aim is for it to be operational next summer.
• We have a solid political and legal framework for activity in the Artic. All Arctic states have drawn up national plans or strategies for the region. The European Union has also recently done so. To a large extent, these strategies outline similar views on the opportunities and challenges we are facing in the Arctic area.
• My Ministry is focused on filling knowledge gaps in the High North. We need to recognise differences within the Arctic region, and local conditions or concerns must be taken into account. But we also need to work together to develop standards and regulations as well as technological solutions to common or similar challenges.
• One example: A bilateral project with Russia on how to harmonise health, safety and environmental activity in the Barents Sea was concluded last year, and it proposed a risk-based approach and 130 international standards. The results are now being followed up in a wider group of Arctic countries as part of "Circumpolar knowledge sharing".
• Pleased to launch today a new Barents 2020 project in cooperation with Standard Norge and many other partners (public private partnership). Aim is to provide Norwegian knowledge about technical standards into the efforts of establishing 15 new ISO standards for "Arctic operations".
• We need to further develop formal and informal structures of cooperation. The Arctic Council as the primary circumpolar body. Presently chaired by Sweden and my colleague Carl Bildt.
• The Arctic Council has successfully addressed issues of key relevance to the Arctic, such as environment and climate change. The historic Search and Rescue Agreement signed by the Arctic nations in Nuuk last year signalled a strong commitment to joining forces to meet common challenges.

Lysark 9: Oljevernberedskap – lenser etc.

• As far as potential damage to the Arctic marine environment is concerned, the greatest risk is that of a major oil spill. A major accident, oil spill or similar, will affect us all. In Nuuk we agreed to launch negotiations on an international instrument on Arctic marine oil pollution preparedness and response.
• The US, Russia and Norway have taken the lead in this effort, which I am confident will result in a binding agreement that will enhance our ability to take concerted action if required.
• Any oil spill response operation in the Arctic Ocean will have to contend with harsh climatic conditions, remoteness and long distances, as well as limited infrastructure and resources.
• Plans for offshore petroleum activity are moving forwards, particularly in the US, Russia and Norway. Maritime traffic is significant and expected to increase as resources become more accessible and the shipping season is lengthened.
• This will require strengthening of our search and rescue capabilities as well as our pollution preparedness and response capabilities.
• In the longer run, I believe we will have to address some key questions, including:
• Do we need a common approach to risk evaluation and risk management for the Arctic Ocean. How can offshore petroleum operators in the Arctic cooperate on oil spill preparedness and response and on establishing mechanisms to achieve this, including the development of response capability?
• How can we best cooperate on developing technology?. Due to the particular challenges in the Arctic and the costs involved, I believe there is a strong interest on the part of oil companies and other relevant actors to cooperate on technology developments, logistical solutions, security measures etc.
• How can we gain support for activities in the Arctic? Confidence building. We need to secure popular support both locally and nationally. It is important to ensure local benefits - the Norwegian experience: Petroleum activity wanted and supported in the High North. Not least due to a long history of safe activity in the southern and western parts of the country and the visible results for industry and local communities on shore. Through integrated marine management it has been demonstrated that petroleum activity can be combined with other forms of economic activity, notably fisheries.

To sum up

• The challenge we face in the High North is to find a way to simultaneously address what are sometimes conflicting needs and considerations relating to energy, climate and the environment. I believe that knowledge, technology and close cooperation between authorities, industry, research institutions and the population as a whole are essential for ensuring sustainable resource development in the Arctic.We are all partners in this endeavour.Thank you.

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