Opening of the OG 21 Forum

Opening speech by State Secretary Sigrid Hjørnegård at the OG21 (Oil and Gas in the 21st Cenury) Forum at Felix Conference Centre in Oslo, 14.10.2010.

Dear OG 21 Forum Participants,

It is a pleasure for me to open the 5th OG 21 Forum. I would like to start by thanking the OG 21 Board and Secretariat for organizing this important event. I am looking forward to a day which will provide valuable new insight to us all as well as the opportunity for dialogue and networking.

The Oil and Gas Sector 
The oil and gas industry in Norway is the backbone of our economy. And in my view the prospects for our oil and gas activities are very good even though oil production recently has declined. There are still large remaining petroleum resources on the Norwegian Continental Shelf. After 40 years of production, sixty percent of the expected resources remain to be produced.

In the past years we have seen a strong interest from the industry to explore for and develop petroleum in Norway. Last year saw a record numbers of new wells and discoveries.

The high level of activity tells me that the Norwegian Continental Shelf still is an attractive place to invest for the international oil industry. As State Secretary for  petroleum and energy this is reassuring. 

I also want to emphasise that efficient and timely exploration of our acreage is  highly prioritised with this Government. The level of activity on the Norwegian Continental Shelf must therefore be maintained.
The Financial Crisis and the Deepwater Horizon-accident

The last three years have been a reminder that it is difficult to predict the future and that risk and uncertainty are integral parts of the industry’s business environment. It is now more than two years since the turmoil in the financial sector started, and there is still uncertainty about what the new normal will be.

Norway has been less affected than many other countries. One reason is the continued high activity level in the Norwegian Petroleum Sector, where we continue to see new projects and investments taking place.

The Deepwater Horizon accident is also a very serious and important reminder of the risks associated with petroleum activities. Fortunately, the spill has now been stopped 

11 casualities and large economic, environmental and reputational costs, were a stark reminder of the importance and value of appropriate HSE regulations and best practices in order to minimize risks.

Norwegian companies were deeply involved in the work to stop the spill. Several of the specialized support vessels were owned and operated by Norwegian shipping companies, and Norwegian petroleum service companies were contributing with their experience and expertise. This shows how advanced and competent the Norwegian supply industry has become – and (despite the tragic circumstances) this is something to be very proud of.

Strict and sound HSE regulations are an integral part of Norwegian petroleum policy. Safety standards are high. At the same time, all involved parties have their say. I believe that is essential in order to maintain public acceptance.

However, we – the authorities and the industry – must learn from the incident in the Gulf of Mexico to ensure that we develop oil and gas resources safely and sustainably.  

I know the OG 21 has a focus on risks associated with oil and gas activity offshore. I welcome more work in this field, and hope that more can come out of this emphasis in terms of actual research and technology development that can strengthen the emergency preparedness of our industry in the long run. In that regard, I want to highlight that the government has made clear that we want to emphasise the development of technology which may prevent or minimise oil spills and corresponding damages in our public R&D programmes. This is also in accordance with the OG 21 strategy.

On Norwegian petroleum history
Norway’s experience with petroleum stretches back four decades. All of Norway’s petroleum resources are offshore, and we have many producing fields with different characteristics and different challenges. There are more than 50 producing fields of varying sizes, producing in total about 2,2 million barrels of oil and liquids per day and some 100 billion cubic meters of gas per year.
Our production of natural gas has doubled since year 2000. We have established an extensive and robust gas infrastructure that will serve us faithfully for many years to come.

When our first oil discoveries were made, we had no experience in petroleum matters. Our challenge was to implement policies and to establish a framework that would further our national aims of maximum value creation for the country.

A significant challenge at that time was the need for new technologies and solutions to be able to develop and produce the resources. And development of new technological solutions has continued to be a key feature of the Norwegian resource management system.

OG 21 
As our national strategy for research and technology OG 21 is a key instrument for value creation and competetiveness in the petroleum sector.

The petroleum industry’s research and technology projects are major contributions to long-term knowledge development, and strengthen our competence. The public R&D effort plays an important role to trigger research and technology development that would otherwise not have been carried out. 
An important example of the value of continued R&D is how increased oil recovery is creating value and extending lifetimes of fields on the NCS. I am proud of the Norwegian track record here. With today’s plans and existing technology, on average 50 per cent of the oil in place will be recovered from the fields on the NCS. As most of you probably know, the Ekofisk field was originally expected to have a recovery rate of 17 %. Today it is almost 50 %.

It is indeed acknowledged by our government that improved oil recovery is essential to our value creation also ahead. Therefore, this spring the Ministry commissioned expert group to look at economic, regulatory and technological barriers to improved oil recovery. The group recently published a report with 44 different suggestions in order to improve oil recovery. There is now a public hearing about the report, and the Ministry’s response to the report will be reflected in the announced White Paper on petroleum.  I understand the Chairman of the Expert Group, Knut Aam, will address this in more detail in a little while.

The industry and internationalization
The establishment of the Norwegian national oil company Statoil, and the active support of the Norwegian supply and services industry by consecutive Norwegian governments, meant that already by the mid-eighties important technology development was carried out in Norway and based on Norwegian competence and skills.

Today the international turnover of the Norwegian supply and services industry is, according to a recent update reported to the Ministry by the Menon consultancy, around 120 billion Norwegian Kroner.  This is about equal to the industry’s total turnover in the market on the Norwegian Continental Shelf. About 120 000 people are directly employed in the Norwegian petroleum industry. Out of these, about 100 000 are in the supply and services industry, in around 1000 different companies.

Another way of putting it is to say that by stimulating continuous technology development through legislation and support instruments we have built Norway’s largest industry – and a global powerhouse.
   
International co-operation and long-term bilateral relations in research and technology is important in developing the international competetiveness of our industry: cooperation creates networks and alliances which in turn strengthen our institutions, industries and the R&D projects themselves. You need only to look at some of our R&D institutes to tell that this is essential to their turnover and day-to-day activities. Moreover, international collaboration showcases our own results to the outside world, which is good for our export industries as well as the R&D institutions themselves.

We will in our contact with other countries continue to pursue such relations, especially in important markets ahead.  

Looking forward

So, what will the future bring?

Norway will remain a substantial petroleum producing nation for the foreseeable future.  We will work vigorously to develop our resource base in a sustainable manner.  May I add on this note that the solution found to the deliniation line between Norway and Russia in the Barent’s sea this spring adds approximately 85 000 square kilometers to the NCS  -  an area about twice as large as Finnmark.  This unlock new prospects in the North, which again offers a new dimension to the long term nature of our petroleum activities. 

In a micro perspective we are, however, facing some considerable challenges. From the large fields that were discovered 40 years ago, we now see a shift towards smaller discoveries. At the same time we are going into frontier areas in the north, which after solution found on our offshore border with Russia now assumes even higher relevance.   Here, harsh conditions and remote resources pose particular technological challenges.

I believe the oil and gas industry has a lot to contribute in providing the technology for the future. The technological adventure that we have seen on the NCS will continue – but it must be with the continued participation with industry and other stakeholders. This leads me to OG 21.

You will hear more about OG 21 by Morten Loktu, the Chair of the Board in a little while. From the Ministry’s perspective I just want to say that we view it as an astonishing success – which has been and will be – replicated in other areas as well. And stakeholder cooperation are the two keywords in this respect.

The Ministry values OG 21 as a strategic instrument. We need continued input from the industry in order to guide our combined R & D efforts optimally.  I am grateful for the responsibility Statoil, other Board members and all the involved experts in the work groups have assumed.  The broad collaboration that has resulted from  the OG 21 Initiative is unique.  I trust the OG 21 with its new strategy will continue to play an important role in our sector, and would like to thank them for their contribution.   

From the government’s perspective we support the implementation of the strategy Research Council of Norway and the PETROMAKS and DEMO 2000-programmes in particular.    Through these programmes we cover the whole chain from long term research to short term R & D and testing.  

I am highly impressed by what the industry has achieved when it comes to innovation and introduction of new technology.  This said, it is not obvious what it takes to be at the cutting edge.  The fundamental asset in innovative competence lies with the many male and female engineers and gelogists that harbour the most important asset of them all; know how.  We need to create visibility to the entrepeneurial excellence we see in our industry.   At the ONS innovation award members of the price winning panel had products that have been supported by PETROMAKS and DEMO 2000, and some of the price winning companies are present here today.

To me, this is indication that our R&D-support work.   I am pleased to note that all three awards,  1) the award for Small and Medium Sized Innovators given for advanced drilling and telemetry systems; 2) the Innovation Award for Innovative well controll and drilling, and 3) the ONS Special Award for offloading and next generation floater technology,  all represent key achievements we have every reason to be proud of!

Global Energy and the Climate
The world needs more energy to support the economic growth required to improve living conditions for people around the world. According to the IEA, fossil fuels are expected to remain the dominant source of energy and account for a significant share of the world’s primary energy-mix in 2030.

At the same time there are increasing concerns about the climate effects increased production and use of fossil fuels represent.  If no new policies are introduced and if the energy mix remains the same as today, global average temperature is predicted to increase by six degrees Celsius by the end of this century. The result will be a global disaster and we cannot let that happen.
The Norwegian approach to the challenge of climate challenge within the energy sector is comprehensive and based on three pillars:

• First, to strengthen our energy efficiency programmes.
• Second, to strengthen our efforts in renewable energy. The aim is to establish a green certificate market in 2012 together with our neighbor country, Sweden.
• Third, to mature key future energy technologies such as carbon capture and storage and offshore wind turbines. 

Norway has ambitious goals in developing carbon capture and storage technology in cooperation with companies like Statoil, Shell and Sasol. The Norwegian state is by far the biggest contributor financially to the world-class Technology Centre Mongstad, but we warmly welcome more partners to join this effort. And the oil companies’ and industries’ skills and experience on underground issues will be of utmost importance with respect to storage of CO2

Closing
My goal is that Norway shall continue to be a world-leading nation in terms of value creation and competetiveness, including efficient and clean petroleum production, production of renewable energy and development of clean energy solutions.    There are major opportunities and challenges from a research perspective to successfully develop our industry in this direction, and I see an important role for OG 21 to play in this regard ahead.

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