Opening speech, OG 21 Forum, Universitetet i Oslo, 26.10. 2007

Slides in pdf

Dear OG 21 Forum participants.

It is a pleasure for me to open this year’s OG 21 Forum here at the University of Oslo.  

As the new Minister of Petroleum and Energy I am highly impressed to see what the Norwegian petroleum cluster has achieved over the years by constantly solving challenges related to the expanding oil and gas activities. 

But, a growing multitude of unresolved challenges lie ahead of us.  I trust we all share the view that Norwegian technology and competence must continue to be in the forefront internationally in order to secure an optimal value creation while at the same time meeting our ambitious environmental standards.

I am pleased to have the opportunity to address some of the challenges related to this ambition and to talk about the role of OG 21 in this context.    

Size of the Government Pension Fund
The oil and gas sector is an important sector for Norway.  We are now harvesting the fruits from investing our best talents and resources in what has become our largest industry.   As can be seen from the slide, the Pension Fund has been steadily growing. In 2007, it is expected to exceed 2000 billion NOK, which is the value of our annual GDP in one year.  In nearly 40 years of activities, the petroleum cluster has created values in excess of 5000 billion NOK in current terms. I am proud to be the Minister for a sector which is the backbone of the Norwegian welfare state. 

I am also delighted that the fund is being invested responsibly under the guidance of the Ethics Committee, attracting attention from public and private investors all over the world.  I welcome a continues refinement of this important tool.

Benefiting the whole society
The oil and gas sector is also very important in light of its industrial spinoffs. As the biggest industry in Norway and with its competence broadly located in various regions, the industrial benefits from the sector are apparent and widely distributed geographically.   As shown in the slide, petroleum activities in Norway are not just a coastal area activity concentrated exclusively in the South Western part of Norway.    With activities expanding further into the north, the oil and gas sector is becoming one of the new key drivers for industrial activities and employment in rural areas nationwide, increasingly so in the Northern region of the country. 

So, my inner picture of this dynamic sector is not the oil platforms, or even the impressive subsea production facilities, but the many male and female engineers and geologists who harbour the most important asset of them all; - know how

 
The Fossil Fuel Future
Energy is required in nearly all aspects of human activities.  As a leading net exporter of energy, Norway is facing a huge challenge to meet surging energy needs from a growing global economy. This is a fact spelled out clearly by the International Energy Agency, IEA, who expects that energy demand will more than double towards the middle of this century.

Apparent from this scenario is that IEA expects that oil, gas and coal will cover more than 80 % of global energy demand by 2050. It is clear that this development represents long-term opportunities for Norwegian oil and gas exports, competence and technology. At the same time, we, as a major oil and gas producer, have a particular responsibility when it comes to climate change and CO2 emissions. Our ambition is to be a leader in safeguarding the environment, by contributing to sustainable supply and use of fossil fuels.

The Petroleum Activities – Main Challenges
Having been asked to address the importance of research and technology, as well as OG 21 in this overall context, I would like to highlight the following key challenges facing our petroleum activities:

1. Increasingly sophisticated requirements to sustain and enhance the value creation on the Norwegian Continental Shelf
2. the environmental dimension
3. the key dimensions of research, technology and recruitment,

Dealing with these main challenges will require a persistent commitment both from the Government as well as from the Oil and Gas Industry.
Our experiences so far tell us why we need to invest more in research and technology. Examples supporting this recognition are numerous.

To that end, I would like to mention how important the introduction of floating production installations was during the 90s. This implied reduced costs and made it possible to develop more challenging fields on our Continental Shelf. 

More recent examples are the Ormen Lange and Snøhvit fields. Key technologies put to use in these milestone developments are multiphase flow, LNG, seismic and seabed production and processing.  Both fields now provide long-term natural gas supplies to important trade partners.  These resources would have been very hard to bring to the market without a determined set of research and technology efforts since the 70s and the 80s. 

And, when speaking of exciting R&D projects on the Norwegian Continental Shelf, it is difficult to avoid mentioning the Tordis Subsea Improved Oil Recovery project which will receive proper and well-earned attention later today. 

A huge upside can be unlocked if we can reduce the cost of exploration and increase exploration success by developing new methods and tools. I know OG 21 has been identifying technological gaps within, among other things, exploration drilling, where the Badger project, which may revolutionise the exploration process by eliminating the need for drilling rigs, is one visible activity of ongoing efforts in this field.   I also would like to appreciate the important work carried out on related gaps and project opportunities in connection with the TTAs (Technology Target Areas) deriving from the OG 21 Strategy. 
 
From a resource owner’s perspective, value creation from the further development of the remaining resources on the Norwegian Continental Shelf is essential.  This potential represents long term and lasting opportunities for our society, if we can successfully meet the challenges related to find and recover more of the remaining resource potential on the Continental Shelf.  Research and development is, as I have mentioned already, key to address this challenge, and we need a strong commitment by all parties to succeed in this regard. 

I have briefly mentioned the need for the oil and gas industry to demonstrate that they are taking the necessary steps to minimize harmful effects on the environment. Many promising areas for further exploration and production on the Norwegian Continental Shelf, such as in the Northern region, are highly environmentally sensitive.  The industry can only expect to obtain access to these opportunities if it is successful in maturing the necessary exploration and production technology to support future activities in these sensitive areas.

In 1997 the zero discharge targets for discharges to sea was established for Norwegian petroleum activities. The target is based on the precautionary principle to help ensure that discharges do not lead to risks to health or the environment. The Lofoten–Barents Sea area is defined as a particularly valuable area, which is subject to more stringent discharge requirements than those in place for the rest of the Norwegian continental shelf.

To operate within these demanding conditions requires advanced exploration and production solutions that are sufficiently safe and environmentally sound.  Clearly, there are technology and research needs arising from this challenge that the industry need to further address.)

The majority of the resources remain in the ground after the shut down of the oil producing fields.    This is not a sustainable scenario in the long-term, neither in a national context nor for global energy security. Focusing on recovering as much of the resources in proven fields is very important and should be an area of great attention for our R & D efforts. 

The Norwegian Petroleum Directorate has established a goal to increase the average recovery on the Continental Shelf by 5 billion barrels before 2015.   This is equivalent to twice the original oil resources in the Gullfaks field,  and illustrates the magnitude of these volumes. 

I am not prepared to risk loosing valuable resources if I can avoid it.  Careful husbandry of resources lies behind my decision with regard to Troll.  I know many regretted not being able to increase production of the gas, but it is our duty to adopt the long-term view to the best of our ability.

In addition to enhanced value creation from our resources, an overall challenge is the environmental dimension of the oil and gas activities.  Norway has a long tradition as a leading nation in protecting the environment.  It is also our clear ambition to strengthen our role as a pioneering nation within environmental leadership in the future.   This requires an even stronger focus on environmental standards and R & D.

Because of our strong emphasis on the environment, the Norwegian petroleum sector maintains very high environmental standards.  This provides a solid point of departure in addressing the tasks and challenges within this field ahead.

Emissions to Air
Our leadership and continued efforts within research and development contribute to a more efficient development of our oil and gas resources, and thereby as such, to more environmentally benign activities.  The graph shows that compared to the rest of the world, we have been (rather) successful in reducing emissions to air from offshore petroleum production. If you look to the bar on your left hand, CO2 emissions per produced oil equivalent on the NCS is only one third of the average emissions internationally.

One important factor behind this development is of course the CO2 tax introduced in 1991. The tax has given incentives to sustainable solutions and emission reduction. The CO2-tax was critical in realising the Sleipner and later the Snøhvit CO2-storage projects.   StatoilHydro now injects around 1,7 million tonnes of CO2 into the underground from these two projects.   

Carbon Capture and Storage, CCS
Technology development is vital in order to curb emissions to both air and water.  We need urgent investments in low carbon technologies. 

Two major Carbon Capture and Storage, or CCS projects, are currently in progress at Mongstad and Kårstø. The Government has proposed to allocate NOK 1 125 billion Norwegian kroner to research, technology development and work with carbon capture, transport and storage in 2008.  The dividens from the  2 billion NOK Gas Technology Fund for R & D purposes is part of this funding. 

A decade of storing CO2 has given unique data and experience.  Continued surveillance shows that CO2 concentrates in the reservoir, and provides scientific evidence that injection of CO2 into geological formations is feasible without leakage of CO2, given the appropriate field-specific conditions.

RD & D in the Petroleum Cluster
Judging from the overall challenges and opportunities following the future activities on the Norwegian Continental Shelf, our national research and technology efforts need to play an even more important role in the future. I expect OG21 to play an active role on that stage.

The bulk of petroleum related research and technology activities takes place in the industry and research community.  It is therefore important that  oil companies, contractors, research institutes and academia recognize their individual and common responsibility in realising further progress in the field of oil and gas innovation and research.  

Public support for research and development is important. It generates additional activities within the sector.  But, I would like to emphasize that the strongest commitment to enhance the sector related research and technology efforts, lies with the industry.  We would like to be partners, but the industry has to take the lead.

I would also like to mention the provisions in the Accounting Agreement, which allows research expenditure to be covered by licence budgets.  This provision sets the oil and gas industry in a unique position compared to other industries when it comes to research costs.   I would like to invite the OG 21 to more broadly address the opportunities embedded in this framework when conducting the further work with the national research and technology strategy.

Petromaks and Demo 2000 – as public programmes within research and technology demonstration – both lean on the OG 21 strategy in terms of setting their individual priorities. As a direct follow up to the OG 21 strategy the Petromaks programme has been established as the largest programme in the portfolio of the Research Council, whereas Demo 2000 was introduced in 1999 in response to the shocks from the low oil prices at that time.  OG 21 plays a crucial role in making sure that public funding is co-ordinated and that it supports and supplements the efforts in the petroleum cluster in an optimal way.

Highly skilled competence is the backbone of the petroleum sector, and we need to keep this priority high on our agenda. It is important not to rest on the laurels of past merits in managing the future of our oil and gas industry.

Recruitment to the ‘hard sciences’ is going slowly, although there has been a slight increase in the past couple of years. But, the average age of the work force with this education is rising. The challenge then, is to increase the rate of recruitment and in particular among the female population. 

As I have already shown, the Norwegian track-record within research and development is an important foundation to build on in this regard. I am happy to be able to acknowledge that the Petromaks programme now funds 135 Ph.d.-students. Another 110 will be supported through upcoming projects.

Recent studies show that upcoming generations attach an increasing importance to values and ideological aspects when choosing a career path. Among other things, they are attracted to work that can contribute to improve the environment and reduce climate change. In this connection, the oil and gas industry has a lot to offer. There is a small piece on the web site of OLF, The Norwegian Oil Industry Association, where a newly recruited engineer stating: “The world will be dependent on oil and gas for many, many years to come. That is why I find it meaningful to be a part of the effort trying to make fossil fuels as clean as possible”. I think that is a very telling remark that should encourage the sector to portray itself to an even greater extent along these lines.

I have already indicated that the future is likely to hold more in terms of opportunities and challenges than the past. Technology, competence and recruitment are key dimensions in this context.  

OG 21 Roadmap
The collective enterprise has always been a Norwegian trademark.  With OG 21, we have created an important new arena where all parties in the oil and gas sector work together towards a jointly defined roadmap for the future.  In the implementation of the OG 21 strategy, collective efforts within research and technology have been and will continue to be crucial. The unique partnership and established dialogue between government, industry, research institutes and universities, through OG 21 and its Lead Parties has been a true success so far.

Some concerns have been expressed about the research and technology efforts in the industry because of the merger between Statoil and Hydro. It is important that we maintain a strong R & D activity within the sector also after the merger. The Government has clearly stated to the Parliament that OG 21 will be an important arena to ensure a strong R & D environment also in the future.  This environment also needs to be transparent and diverse.  I trust that StatoilHydro will have a clear commitment in this regard. 

In my view, it is therefore important that we keep using OG 21 as a strategic instrument to ensure that we guide our combined R & D efforts in a direction where it serves the interest of an optimal, long-term resource management on the Norwegian Continental Shelf.

To this effect, I expect the new board to take OG 21 into a new phase of its work with the OG 21 strategy.  Based on a joint vision for OG 21, I am inviting the new board to report back to the Ministry within the first quarter of next year on the main suggested steps in defining and implementing the national strategy further in the coming years.  

With these words, I wish OG 21 good luck in future efforts.  In doing so, I would also like to thank the old board for the very important job carried out on behalf of our petroleum cluster, and I am at the same time pleased to announce the composition of the new OG 21 board. 

Thank you for your attention.