Foils from the speech in pdf

Dear conference participants!
It is a great pleasure for me to open “The Arctic Frontiers Conference”. The conference is a major event. It focuses on the development potential in the Arctic region and the corresponding environmental challenges. This focus is well aligned with the Norwegian Government’s objective to achieve sustainable growth and development in the high North.

In my presentation today I will concentrate on what the Government is doing to stimulate sustainable development in the High North. In particular, I will focus on the role of the petroleum resources in the North, how these can be a major driving force for developing the northern regions.

Before I embark on my presentation I would like to wish you all an instructive and successful conference. I would also like you to appreciate the fact that the sun is turning up again after two months in hiding. This is a time of celebration and joy and should provide an extra boost to conference!

Energy Use 1990 – 2020
Let us take a look at the global energy picture before we enter into the particularities of the Arctic region. This is useful to put the Artic energy issues in perspective. The global energy situation poses some serious challenges and problems, such as:

energy poverty, dependence on fossil fuels and energy security

The widespread energy poverty is perhaps the most serious problem the world is facing. Large parts of the world do not have access to commercial energy at all. For instance some 1, 5 billion people do not have access to electricity.

Without access to energy, people are doomed to poverty.

Now we see that energy consumption in developing countries such as China and India is increasing rapidly, on the background of persistent strong economic growth. This is encouraging and most welcome.

However, the major part of the increase in energy use will have to come from fossil energy sources, causing CO2-emissions to increase further.

Fossil energy resources are plentiful, particularly coal, the most CO2 intensive form of energy. A number of developing and industrial countries have large domestic resources of coal, which they will prefer to use of economic and energy security reasons.

Renewable energy – such as wind and solar – is likely to increase rapidly in the years to come, but from a very small base. Nuclear power can be an attractive alternative from a climate change perspective, but in many countries public opposition towards this energy form is strong.

Most energy forecasts conclude that the use of fossil energy will continue to grow strongly the next decades, even with strong government policies to support renewable energy.

The world needs increased supplies of energy and cleaner energy. But we also need secure and stabile supplies of energy. Energy security is of primary importance to any country. Particularly for oil, energy security is a challenge. Oil is a strategic commodity and no country can afford to run out of oil. Here the Arctic could play an important role. If the US geological survey is right, 25% of the worlds undiscovered petroleum reserves could be found in the Arctic. Thus, the Arctic region could be part of the solution to the growing energy needs of the world. Exploitation of these resources would lead to considerable economic development in the northern areas, but such a development would also cause considerable environmental concern.

Global emissions – what lies in front of us?
But let me return to the important issue of how to meet the growing energy need without contributing to global climate change. This figure shows how the increase in demand for energy in the International Energy Agency’s reference case leads to higher emissions of carbon dioxide

Like the European Union, Norway has decided to adopt a specific target to keep the average global temperature increase within two degrees centigrade. This means that global greenhouse gas emissions must be cut by more than fifty per cent before 2050. In the reference case the increase in global energy demand leads to global emissions of 40 billion tonnes of carbon dioxide in i 2030. This is 14 billion tonnes higher than the emissions in 2004. A major part of this increase is driven by non-OECD countries. By 2010 China will surpass the US as the largest emitter of carbon dioxide. If we are to succeed in stabilizing the average global temperature major changes has to be made. And soon.

Part of the answer could be carbon capture and storage. The Norwegian Government is focusing on developing this option, and CO2 capture and storage also receives considerable attention in many other countries around the world. If we succeed in developing this option, it would reduce emissions from fossil fuels dramatically, allowing the world to continue using fossil fuels to meet future energy needs without harming the environment.

CO ₂ capture and storage
As a major producer of fossil fuels Norway has an important role in contributing to technology development and enhanced capacity.

IEA estimate that carbon capture and storage can constitute 20-28 per cent of total emission reductions by 2050.

Norway has extensive experience in storing CO2 in geological structures. Since 1996, one million tonnes of CO2 per year have been separated from gas production on the Sleipner Vest field in the North Sea for storage in a geological formation 1,000 metres below the seabed. Storing CO2 in this formation is unique. This is the only facility in the world where large quantities of CO2 are stored in a geological formation under the seabed. When production of natural gas, NGL and condensate will commence from the Snøhvit field in the Barents Sea, 700 000 tonnes of CO2 will be separated annually from the natural gas and re-injected and stored in a formation 2 600 metres under the seabed.

The Norwegian government and the oil company Statoil have signed an agreement to establish the world's largest full-scale carbon capture and storage project in conjunction with the projected combined heat and power plant at Mongstad. The project is to be fully operational by the end of 2014. The first stage of the project will be in place at the start-up of the proposed cogeneration facility in 2010.

This is a unique agreement. There are many plans for carbon capture from power plants, but this is a concrete project that will be up and running by 2010.

The Mongstad project will be the world’s largest of its kind. By this we move from the research/small scale phase to actual construction of a full scale CO2 capture facility. Several technological solutions will be tested in parallel in the first phase of the project. This will be of great interest to any other future gas-fired power plants. This arrangement will ensure that technological developments in Norway will have a broad international relevance and will not be project-specific to Norway. Knowing that the world energy demand will increase by 50 per cent from 2004 to 2030, I believe that carbon capture and storage is an important step in our battle against global climate change.

Norwegian Petroleum Production
Norway possesses large energy sources. Norway is close to being self supplied with renewable energy and we are the third largest exporter of oil and gas. Mother Nature has certainly been generous to us.

Our most recent forecast indicates that gas production will continue to increase and could reach a level of 130 Bcm in a few years time.

The story is different for oil production, which has been somewhat disappointing in recent years. Production in 2007 could be around 2, 6 million barrels per day, a level we expect to sustain for some years.

There are still large undeveloped resources on the Norwegian continental shelf. In a world that needs increased supplies of energy, we have a responsibility to develop these resources in a sustainable manner.

Emissions from offshore petroleum production
This figure shows emissions of 5 greenhouse gases (counted in CO2 equivalents) from the Norwegian petroleum sector compared to an average of the emissions from other petroleum provinces. CO2 emissions from the Norwegian petroleum production stems mainly from flaring and energy production on installations offshore.

Norway has a wide range of policies and instruments to help fulfil our international climate obligations. Environmental concerns have always been an integrated part of our petroleum policy. We introduced carbon taxes in 1991. The tax rate for petroleum activities is high – approximately 50 US dollars per tonnes CO2. Reports show that the CO2-tax has resulted in emission reduction of as much as 3 million tonnes of CO2 per year.

I think our experience shows that at lot can be done to reduce emissions also in the petroleum sector itself.

A strategy for the high north
On the first of December last year, the Norwegian Government presented its strategy for the high north. Meeting the challenges and opportunities of the high north is main priority. One third of mainland Norway lies north of the Arctic Circle, and Norway has the responsibility for managing resources in waters six times the size of its mainland territory.

Key words are presence, activities and knowledge.

The main issues are: Sustainable use of renewable and non-renewable resources, climate change and environmental protection. It all amounts to securing safe and healthy living conditions for people in the region, based on sound economic activities.

As I previously mentioned, some estimates indicate that the Arctic might contain as much as 25 per cent of undiscovered global petroleum reserves, although this cannot be determined until we have harder facts. We will develop the petroleum reserves in the north, while at the same time working actively to combat climate change.

Furthermore, our interest in the high north makes it important to strengthen our long standing cooperation with Russia. Russia and Norway are both significant producers of oil and gas. We are neighbours in the North, and we share the responsibility of managing the vast Barents Sea. Moreover, it is in both countries interest to develop an ever closer co-operation to ensure sustainable management of the natural resources in the Barents Sea.

In this respect, it is important to have a very long term perspective. For some, the story of cooperation with Russia ended with its decision in October last year to develop the Shtokman field without foreign participation. This shows, in my opinion, a lack of perspective. The strategic importance of the high north is not in any way limited to Norwegian oil companies participation in one gas field in the Barents Sea. The perspective is much broader than that. As the cooperation between our two countries continues to develop, there will be possibilities for industry in both countries. The Norwegian supply industry are for example already engaged in cooperation with Russian partners, and will have a lot to contribute in future developments of Russian petroleum fields, Shtokman included.

We will continue to develop our co-operation with the Russians, not least with regard to agreeing a delimitation line in the Barents Sea. And together with our neighbour Russia, we share the ambition of developing this region in accordance with the highest environmental standards. Our ambition is to be in the lead in developing these possibilities.

Integrated Management Plan
The Norwegian Government presented the Integrated Management Plan for the area from Lofoten to the Barents Sea in March 2006. The plan is a pioneering effort to achieve an ecosystem-based management of the oceans surrounding Norway.

It is the first time we have completed such a thorough process. All influences on the eco-system in the Lofoten - Barents Sea area were evaluated within the larger context, and it concluded that the Barents Sea environment is in a satisfactory state.

The Government intends to maintain this satisfactory state also in the future, and it has put restrictions on petroleum activity in the management plan area:

• Zero-discharge from the activity is a prerequisite for all petroleum activity in the Norwegian Barents Sea.
• No petroleum activities will be initiated in coastal areas and in areas of particular fisheries and environmental importance (dark blue colour)
• As we move further away from the coast-line, fewer restrictions are placed on petroleum activity (medium and light blue colour)
• No petroleum activities will be initiated outside Lofoten and Vesterålen (PEK!) during the current parliamentary period. For the areas named Nordland VII and Troms II the question of petroleum activities will be considered when the management plan is revised in 2010.

The Management Plan will be a dynamic process. Until the time of revision, the Government has decided to carry out extensive research and mapping to strengthen our knowledge about the area. It also places a sound basis for petroleum activity in the Barents Sea.

Let me turn to the ongoing and future petroleum exploration activity in the southern part of the Norwegian Barents Sea.

Field Development – Snøhvit and Goliat
60 % of the Norwegian Continental Shelf is opened for exploration activity. In the Barents Sea, only the southern part is currently available to the industry.

Snøhvit is the result of the first exploration activity in the Barents Sea during the 1980’s. The partners in the Snøhvit license are currently planning for the construction of new production capacity at Snøhvit LNG, also known as a train two. In order to make such a development possible, it is necessary to make new gas discoveries in the area. New exploration activity is therefore essential, and discoveries such as Tornerose bear proof of a very promising future

Development of the Goliat oil discovery is another very promising project. The exploration wells drilled so far have proven that Goliat is a major oil discovery. Investment in developing the Goliat field is now likely to exceed twenty billion Norwegian kroner. This makes the Goliat field development one of the most significant future field developments on the Norwegian continental shelf. Development of this field will definitely put Northern Norway on the petroleum map.

Licensing Policy in theBarents Sea
New exploration licenses in the southern Barents Sea were awarded in the 19th Licensing Round in 2006, where the oil companies’ showed good interest. Our intention – by awarding what might be characterised as “key blocks” – is to obtain updated information about the potential in these relatively unknown areas. Over the next few years, extensive exploration activity and drilling will take place.

The Norwegian Barents Sea is still largely a frontier area. Our estimate of undiscovered resources sum up to more than 6 billion barrels of oil equivalents – with a large upside potential. We know the geology well only in the Snøhvit-Goliat area. In the northern parts of the Barents Sea we know only little, but the potential is there. The Area of Overlapping Claims is of course geologically very much unknown.

We focus our efforts on developing strategically important infrastructure in mature parts of the Barents Sea. We also focus on exploring frontier areas. I see a new petroleum province emerging.

Technology and the Arctic
Technology is a vital prerequisite in the development of Norwegian petroleum resources. We now see discoveries made years and even decades ago being developed. This is mostly due to cutting-edge technology enabling development of resources in deep waters with high pressure and geological complexity. New technology also enables increased recovery from existing fields.

Looking into the future, many of the fundamental technological challenges facing the oil and gas industry will be the same in the Arctic as elsewhere the industry is active or expands into. The activities at the Snøhvit and Ormen Lange developments represent valuable experience which can be used in future Arctic developments.

In general, challenges such as the need to reduce cost, increase exploration efficiency, increase recovery, and develop a new generation of sub-sea and down hole production systems are relevant to all geographical areas of existing and future oil and gas activities.

Challenges that are more specific to the Arctic will be the ability to handle geographically related conditions such as extreme temperature and weather conditions, icing and problems related to ice infested installations.

Furthermore, the ability to develop remote resources located at very long distances from existing infrastructure, and the ability to operate in a secure and sustainable manner in highly environmentally sensitive areas are of particular concern in the Arctic.

Increased research and development efforts are needed to meet all of these challenges. These efforts have mainly to be met by industry, but the government also intend to contribute in accordance with the goals set out in the strategy for the High North.

Sustainable growth and development in the high North
The overall objective of the Government’s High North strategy is to create sustainable growth and development. I think the ongoing development of the Snøhvit field serves as a very good example of the opportunities that such developments bring to local and regional businesses.

In the feasibility report for the Snøhvit field development it was estimated that the local share of the value of all contracts would amount to roughly 600 millions NOK. Already, contracts for more than three billions have been assigned regional companies. Of this amount more than 2 billions are assigned companies in the Hammerfest Area. Regarding manpower, around 11 000 Norwegians have been engaged in the construction work at Melkøya until now. Approximately 4 000 are from the western part of Finnmark of whom more than half are from the Hammerfest area.

These figures clearly demonstrate that the petroleum activity in the high North creates business opportunities. However, the High North Strategy outlines activities that we believe will further increase opportunities for companies in the region.

Nationally, the Government will support and cooperate with networks of suppliers and business associations which contribute to training in tender procedures, pre qualifications and improved information for local and regional companies. One example of an association that are doing exactly this is Petro Arctic which was established in 1997 in connection with the development of the Snøhvit field. Around 360 companies are members in this association with a common aim to put regional companies in position for contracts in the years to come.

I think local businesses have a lot to gain through cooperation and partnerships with associations, companies and organisations with long experience from the oil and gas business in the southern part of Norway. The Norwegian Government would supportsuch a move. Useful in this respect would also be Innovation Norway and Intsok.

Our goal is that regional manpower should be competitive for all positions in the oil business. This requires focus on education and training for specialists in the area. We are pleased to see that universities and academies in Northern Norway are taking on this challenge. We are also pleased to see that they are entering into educational cooperation and exchange of students with Russian counterparts.

To sum up; We now have a real opportunity to demonstrate how modern sustainable management methods can be applied to develop the petroleum resource base in the North. Cooperation with our Russian neighbours is very important part of this opportunity.

Exploitation of the petroleum resources will have to take place in harmony with the environment. We must continuously develop our knowledge of the ecosystem in the North to secure that our decisions are taken on the basis of the best available information and – not to forget – we must move ahead in harmony with the thousand-year old tradition of harvesting renewable resources. I believe that all of this is possible and that Northern Norway has just seen the beginning of its petroleum era. I am convinced that Northern Norway and the Northern areas in a broader meaning will experience many great achievements in the years to come. The potential and possibilities are there.

Thank you for your attention!