Intsok's 10 year anniversary

Dear Audience – ladies and gentlemen,

I am very happy to be here this afternoon, celebrating the tenth anniversary of Intsok.
It seems just a few years ago since 1997. But ten years has passed. The world has changed. In 1997, the Kyoto-protocol was signed; one did not imagine China and India to influence the global economic development to the extent we see today; and “globalisation” was still a fairly new and fashionable term. Much has happened.

In 1995, our Prime Minister Mr. Jens Stoltenberg was the Minister of industry and energy. In a letter to the oil industry in March 1995, he addressed three key challenges for the future of the Norwegian oil and gas activities:

• Continuation of the efforts to strengthen the competitiveness of the Norwegian Continental Shelf,
• Internationalisation of the Norwegian petroleum cluster
• Reducing the environmental impact of the oil and gas sector.
  

The vision was a future where the Norwegian oil and gas industry would be less dependent on the activities on the Norwegian Continental Shelf. The ambition was to strengthen the petroleum cluster’s international competitiveness. A closer cooperation between the government and the industry was called for. This was the basis for the establishment of INTSOK.

A continued focus on the competitiveness of the NCS is necessary. Still, the situation on the continental shelf today is far better than anyone could predict in 1997. The investment and activity levels are high and will remain so for the coming years. However, when it comes to the two other challenges addressed in Stoltenberg’s letter – internationalisation and environmental impacts – they are more important to the Norwegian oil and gas industry than ever before.

Ten years ago, Statoil and Hydro was in the very beginning of their internationalisation processes. And most of the supply and service industry concentrated on the Norwegian Continental Shelf. Today, Norwegian based oil and gas related industries are engaged all over the world. Let me point at three characteristics of this highly successful process.

First, the growth in the international sales by the supply and service industry is remarkable. In 2005, international sales amounted to about 50 billion NOK. In other words, international sales have tripled in ten years. The extent of international business activity clearly shows that the Norwegian based industry is highly competitive both at home and abroad.
   
Second, the international competition is not reserved for the large firms only. Even if internationalisation clearly is correlated with size, we have witnessed a growth in the international activities of smaller and medium sized firms.

And third, the industry is more than ever engaged in markets that are distant – geographically and culturally. During the last ten years the UK and North America have been the most important markets – and still are. There has however been a sharp growth in other markets, such as Latin America, China and West Africa – the latter one account for almost the same size in sales as US and Canada together.

The international competitiveness of Norwegian oil and gas companies is to their own credit. I am impressed with their achievements. I would however also like to emphasise that many of the international customers are the same oil companies that have experience with the Norwegian supply and service industry on the NCS.

Reflecting on the international growth the last ten years, one can conclude that the world looks different: Going international is no longer an additional activity; it is an integral part of the commercial strategy for most of our oil and gas industry.

This development is also reflected in the reasoning behind the merger between Statoil and the oil and gas part of Hydro. Combining the resources and knowledge of the companies will contribute to a financially and technologically sound company which will be a stronger international player than the two companies are separately.

Even if I wanted to; I could not claim that the increased international activity in the supply and service industry is all Instok’s credit. What I can say is that Intsok certainly has contributed to it. And on a day like this it should be underlined that Intsok has been a success.

Intsok’s partner companies cover all parts of the value chain – from seismic surveys to decommissioning. Their partners are reflecting the whole spectre of Norwegian based supply and service industry; from smaller specialized firms to large contractors, from established firms like AkerKværner to fairly new enterprises like APL and Marine Cybernetic. All of which are making their presence felt in new markets. In Trondheim, Intsok introduced me to EMGS Electromagnetic Geoservices and their methods of using electric impulses for exploration purposes, which I know are gaining access to new markets. I have really enjoyed meeting the industry, learning about their drivers and barriers in the internationalisation.
 
Last year the Ministry of Petroleum and Energy initiated an external evaluation of Intsok and a study of the internationalisation of the service industry. These reports clearly show that Intsok has positioned itself in the right markets at the right time. And in both studies, the supply industry reports that they find Intsok useful in gaining access to new markets.

Particularly small and medium size firms striving to enter new markets find the international meeting places arranged by Intsok very helpful. Both larger companies and government bodies benefit from Intsok’s ability to quickly facilitate contact with all relevant players in the Norwegian oil and gas sector – they actually manage to gather Norway Inc!

For the government, Intsok stands out as a highly effective and useful industrial policy instrument. I would like to mention a few of Intsok’s characteristics that can explain their success:

• One, Intsok is a highly effective organisation. With limited resources and a lean organisation, they have a high level of activity and are concentrating on 14 markets!  
• Second, Intsok is highly competent. The staff has several years of experience from the oil and gas industry – which I believe is a vital condition for Intsok’s success. 
•  And third, they deliver highly diversified services. Their bread and butter are seminars, network meetings and advice provided by local experts. But in addition, they have launched partnership projects matching Russian and Norwegian companies, a project of considerable significance for Norwegian industrial policy in the North. Further, they have initiated impressive projects for developing local competence in West Africa. And they have arranged for cooperation between Norwegian and Brazilian petroleum research institutions in order to develop and commercialize new technology abroad. In other words: Intsok leaps from corporate social responsibility to hard core commercial projects.

Every era has its set of challenges and responses. Two of the challenges posed in Stoltenberg’s letter ten years ago, namely internationalisation and environmental impacts, are more important today than ever before. However, the challenges might have different colour, shape and implications than they had a decade ago.

As I see it, our main task is to supply energy in a manner that is both reliable and environmentally sustainable. The International Energy Agency estimates that even with our best efforts to restrain energy growth, the world consumption of energy will increase with 38 % by 2030 and fossil fuel will still meet 77 % of the energy demand. At the same time as there is a strong need for energy and large timely investments, the access to resouces are growing increasingly challenging. This is due to technical barriers as well as stricter commercial conditions imposed by host countries. And more fundamentally, we are faced with the challenge on environmental impacts. In short, we will need a lot of secure and clean energy.

At least three fundamental challenges for the Norwegian oil and gas industry can be derived from this: 

• One, globally, National Oil Companies now control around 90 % of oil and gas reserves and 75 % of production. The strengthened position of the NOCs is likely to imply more direct involvement with host country governments. It is difficult to predict exactly how, but the traditional relationship between NOCs and IOCs will probably be affected. This means that both oil companies and the supply and service industry might have to find new ways of cooperation – in partnership with each other, governments, other business stakeholders and non-governmental organisations.
  I believe the Norwegian oil and gas cluster are well-equipped in dealing with potential new business alliances. Both our oil companies and suppliers have experience from cooperating closely with other players in the petroleum cluster as well as regulating bodies and various levels of authorities.
• Second: More direct involvement with host country governments also gives rise to new dilemmas. Many resource rich countries turn to the oil and gas industry for assistance in converting their natural resources into sustainable growth. Both oil companies and the supply industry frequently meet new local content requirements.
  Norway has for decades cooperated with developing countries, lending our own experience in resource management. The government has strengthened the support to the Oil for Development programme. Let me also add that Intsok has been contributing to the programme with industrial expertise. In Nigeria, Intsok’s efforts have resulted in a concrete contribution to the country’s local content policy and to the Norwegian profile. Again, I believe Norwegian companies have a competitive advantage regarding local content and social responsibility because they have experience from a close dialogue with the government on exactly these matters.
• Third and finally – the impacts on the environment are challenging all of us. The environmental challenge will have to be addressed both by government and industry. The industry will be affected by strict requirements and enhanced public awareness. On the other hand, there will be a need for improved technology – related to both petroleum and renewable sources.

And again I am optimistic regarding the Norwegian oil and gas industy’s ability to meet this challenge. During the last decades, the industry has met environment requirements at the Norwegian Continental Shelf – related to both emissions to air and sea and to sustainable co-existence with the environment and other industries. Both environmental-friendly technologies and managerial skills developed in order to deal adequately with the environment create new business opportunties for the industry worldwide.

The NCS has been a testing ground for new technology and collaboration between the industry and R&D institutions. The government will continue to prioritise research and development. The challenges I have described will require that industry, resarch institutions and government work together. Again Intsok is one very important element as it gives this triangle additional leverage internationally. Let me stress that I find it essential that Intsok continues to work with R&D instutions, Demo 2000 and Innovation Norway. I think all of them reinforce and complement Intsok in a commendable way.

The government’s goal is that the Norwegian petroleum sector will continue to thrive in the future. Therefore the government will continue to support the internationalisation of the oil and gas industry. We cannot succeed if we do not interact with players in other countries and markets.

For me, Intsok is a tale about cooperation. Intsok illustrates that cooperation between different industry segments is possible. It proves that cooperation between oil companies and the supply and service industry is mutually beneficial. And finally – it serves as an encouraging example of the cooperation between the public and private sector, which we so often strive for.

Therefore – and before concluding – it is natural for me to express my compliments to Johan Nic Vold for his instrumental role in giving birth to Intsok, to Sven Svedman as the first managing director, to Sverre Skogen for his former chairmanship and to Morten Rud for his effort as a vice chairmen. To Rasmus Sunde I would like to say well done so far and all the best for your future endeavours with Intsok. And to Guldbrand Wangen and all your staff – thank you for the dedication and enthusiasm you all show in your work.

Intsok has met the expectations and pursued the goals that were set for it. Looking back I say with no hesitation that Intsok have managed to adjust admirably to an ever changing business climate. Thus I am confident that Intsok will be able to navigate in the waters that lie ahead.

Congratulations and best wishes for another 10 successful years!