Foils from the speech in pdf

Ladies and gentlemen!
It is a distinct pleasure for me to be present here at the traditional Sanderstølen seminar and discuss important energy topics with you.

What are the major energy challenges of today? As I see it, they are:

• the widespread energy poverty and the growing need for energy, particularly in developing countries
• the need for improved energy security
• the need for cleaner energy on the background of the growing threat of climate change.

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 adequate supplies of affordable energy, economic growth and welfare will suffer.

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, but creates at the same time climate challenges as the major part of the increase in energy use will undoubtely come from fossil energy sources.

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.

Strong increase in fossil energy is inevitable, even with strong government policies to support renewable energy. And by that, increasing emissions of carbon will follow.

This is the huge challenge: how to meet growing energy needs without ruining the global climate, and: we have today been presented for even more worrying news from the IPCC. I will go more into this later, but first:

Energy consumption
Will resources be a problem in meeting future energy demand? Particularly for oil, this has been a much debated issue. However, today most experts believe that oil and energy resources should be sufficient for several decades yet. I share this view.

Research, new and improved technology, enhanced oil recovery and timely investment in new production capacity is the key for meeting growing energy needs.

But the investment climate is difficult in many energy rich parts of the word.

There are social and political tensions in a number of large energy producing nations.

In Middle East and other oil rich regions National Oil Companies (NOC) dominate both the upstream and downstream activity. Globally, National Oil Companies now control around 90 % of oil and gas reserves and 75 % of production.

Developments in recent years, the increasing “resource nationalism”, could further limit investment opportunities for the IOCs.

Will the dominance of NOC be a hinder for investment in the oil and gas sector? Will NOC have the capital and technology necessary to develop the resources? I don’t think there are simple answers to these questions.

Whatever role IOC will have, the importance of the investment and operating environment must be underscored. A stable, predictable and transparent system will facilitate investments in the energy sector.

The world needs increased supplies of energy, but it also need secure and stabile supplies of energy. Energy security is of primary importance to any country.

Middle East producers – share of oil and gas
Particularly for oil, energy security is seen as an issue.

Diversification of sources of supply is basic to energy security. But oil resources are, as we know, strongly concentrated to the Middle East. It is a fact that these regions have historically also been politically unstable and frequent disruptions to oil supplies have occurred.

We need to increase investment and supplies from sources outside the Middle East, if the dependence on this region is to be reduced. However, high costs and limited oil resources are constraining supply from a growing number of Non-OPEC countries, Norway included, and I will come to that soon. Realistically there is little we can do about the dependence on Middle East for oil.

Security issues are not only confined to oil, but also gas, as we have experienced in Europe quite recently.

We support Russia when it demands market prices for its oil and gas. But, to cut off supplies is not an acceptable measure. We are concerned that such actions might undermine the position of gas in the European market.

Norway is a significant exporter of oil and gas. It is a basic objective for us to be a stable and predictable supplier of energy.

Liguld production
We have for a number of years had a stable oil production of around 3 mbd. However, production does not come by itself. Increasingly we face difficulties in sustaining oil production.

Production in 2007 could be around 2, 6 mbd. This is lower than our previous forecasts.

The main reasons for the reductions are delayed projects and shortage of both exploration and production rigs.

Oil production in Norway seems to be on a slow, declining trend. However, the current high oil price level will help to justify investments in exploration and IOR projects. Exploration and IOR projects are likely to increase recoverable reserves. We therefore believe that the investments in the coming years, will enable a higher production rate than previously assumed in the period after 2011.

Estemated Gas Production
The story is different when it comes to gas. In 2006 our gas exports was about 85 BCM. This places Norway as the second largest exporter to the EU- countries, where we are delivering around 15 % of their total consumption. Our most recent forecast indicates that gas production will continue to increase and could reach a level of around 125 – 140 Bcm by the middle of the next decade.

Projects under consideration
Several projects under consideration will contribute to gas sales at this level. The most important of these projects is the Gas Network Expansion project. This project will ensure that potential increased gas production from Troll can be transported out of Norway. The project involves building a new pipeline from Kollsnes to the Continent or UK and a pipeline from Kollsnes to mid-Norway. These pipelines will make possible evacuation of gas from resources outside mid- Norway where there are several discoveries and still a good exploration potential.

The project is not yet decided upon and one of the main uncertainties is related to the timing of the increased gas production in light of the optimal oil recovery from Troll. Like the oil companies I want to see an outcome that gives the highest value creation from the total resources in the field.

Gas is a very transport intensive industry, and an important task is to organize this part of the business in a suitable way. The transportation system is our gas highway to Europe.

Five years ago, we fully reorganized the gas transportation system in Norway.

Most importantly, we established an Independent System Operator – the state-owned company, Gassco. The ownership of the Norwegian upstream pipeline network is not unbundled. Producers on the shelf are the owners of the transportation system. However, the owners have to book capacity in the system in the same manner as any other shipper – through Gassco. Furthermore, the owners have no say in the marketing of the transportation capacity and are treated as any other shipper. Gassco is the operator, capacity administrator and maintenance planner of the system.

In the recently published communication: An Energy Policy for Europe, the European Commission underlines the importance of creating a truly competitive European-wide energy market. The Commission points to the establishment of Independent System Operators as one means of achieving this. Such organization has been in place in Norway for about 5 years and which has proved to be very successful.

I am glad the EU Commission has a permanent focus on achieving a well-functioning internal energy market.

Energy supply is important, but most important is the future of the planet. The challenge is to reconcile these competing aims.

Serious steps have to be taken towards curbing CO2-emissions. Climate change is a problem too grave to be ignored by any country.

The IEA Global Energy Outlook 2006 presents a reference case where the increase in global energy demand leads to global emissions of 40 billion tonnes of carbon dioxide in 2030. This is more than 50 % higher than in 2004. We have had excellent speeches on what we can expect to be the situation in China and India. If we are to succeed in stabilizing the average global temperature major changes has to be made. And soon.

The Kyoto Protocol was a first step. A major challenge is that the Annex One Parties represent less than one third of global emissions, and the share is shrinking. To make a real difference, we need more countries to take on stronger commitments. As we develop a broader and more ambitious post-2012 climate regime, we urgently need countries with large national emissions on board. The US, Australia, and the larger developing countries such as China and India must contribute.

As long as developing countries have per capita emissions way below the average of Kyoto signatories I think the economic contribution from these countries will be small. The challenge would be to enter into practical cooperation between Kyoto signatures and India and China and others to really cope with CO2 emissions from thousands of coal plants in these countries. A massive investment from the developed to the developing world is needed.

Technology will play an important role in including the developing countries. Energy efficiency and Carbon capture and storage provide promising opportunities.

Carbon Dioxide 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 nearly 30 % 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 such 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 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.

Mongstad CCS Project
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 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.

Let me sum up.

Consumption of fossil energy will continue to grow strongly in the next decades, especially in countries like China, India and the developing countries. We are dependent on fossil fuels and will be so for a long time.

However, basically increased use of fossil energy is good thing, as energy is needed to improve living standards and combat poverty.

It is inevitable that CO2 emission will continue to increase and thereby further intensify the process of global warming and climate change.

How can we meet the growing energy need without damaging the global climate fundamentally?

A variety of different measures must be implemented.

Is nuclear energy a viable option in carbon abatement?

Is biofuels a sustainable energy alternative?

How to draw China and India into a binding carbon cutting?

I have pointed out that technology will be a vital option. Improved energy efficiency is one. Developing carbon capture and storage has the potential to reduce the emissions from the use of fossil fuels to near zero. As such, it is an option that could be particularly attractive for oil and gas producers. And therefore dear ladies and gentlemen:

I would like thank you for your attention!