World Energy Outlook 2010

Opening speech by the Minister of Petroleum and Energy Terje Riis-Johansen at Statoils Autumn conference in Oslo, 15.11.2010.

Ladies and gentlemen,

It is a pleasure to be back here at “Det norske teater” for what has now become a tradition; the Autumn Conference. The main character here today is the International Energy Agency, presenting its flagship publication – World Energy Outlook 2010.

This year, the World Energy Outlook can be read as a warning to us all. Keeping in mind the setbacks from Copenhagen; momentum seems to have been lost. In just one year, the estimated global cost of achieving the two degrees target has increased with a staggering one thousand billion dollars. Even worse; the objective of limiting global temperature rise to only 2 degrees Celsius is now seriously threatened.  

The IEA report shows that, with the pledges under the Copenhagen Accord and pledges made in the G20 to remove subsidies on fossil fuels, we are on the path to a 3.5 degrees increase. This might have catastrophic consequences for many vulnerable countries around the world. At this moment in time, I would like to quote the UN Secretary General, Ban Ki-moon: “We have our foot on the accelerator, and we are heading for the abyss”.

In fact, there is a growing concern that it will be very difficult to agree on a global and binding climate agreement that will be sufficiently strong to deliver the 2 degrees objective.  Norway will keep pushing for an ambitious, global and legally binding agreement. Climate change is a global challenge and we need a global solution. I hope that the upcoming meeting in Cancún will provide a clear direction and decisions that can provide the foundation for the work going forward to South Africa next year. Prime Minister Stoltenberg has co-chaired the Advisory Group on climate Finance. Recently the group provided a report on how to scale up climate finance. This report may contribute to forward momentum in the climate negotiations.

While we are working towards a new global agreement, we need to enhance our mitigation efforts. In this respect the IEA and the World Energy Outlook offer important analyses and advise for countries committed to limiting climate change. Let me mention a few examples:

• Developed countries must take the lead in the global efforts to reduce greenhouse gas emissions. We need ambitious emission targets. This is why the Norwegian Government under the Copenhagen Accord has pledged a climate target corresponding to a 30 per cent cut in emissions from the 1990 level by 2020. We are also willing to increase this target to 40 per cent if this can contribute to an agreement on an ambitious climate regime.            
• We need to set a ‘real price’ on energy. Removal of inefficient subsidies of fossil fuels would be an important step. 
• Increased deployment of new and innovative energy technologies and solutions will be necessary. The Clean Energy Ministerial that I attended in Washington DC in July is an example of a group of energy ministers working toward faster deployment of new and more efficient energy technologies. This example shows how developed and developing countries work together on concrete issues to achieve a common goal in curbing emissions of greenhouse gases. While we wait for a global agreement on climate change, we need to pursue possibilities such as this initiative.

There is no quick fix when it comes to making the global energy picture more sustainable. Faced with an increasing world population, economic growth is vital in order to reduce poverty and provide prosperity and social welfare – especially in the developing part of the world. Such a process is fueled by energy. 

The IEA tells us that 1.4 billion people lack access to electricity. 

2.7 billion people – nearly half the world’s population – rely on traditional use of biomass for cooking. In today’s world this is an intolerable situation. The good news is that it will not cost that much to provide universal energy access: The IEA has estimated the cost to only some 3 per cent of what will be invested globally in energy infrastructure over the next 25 years. 

Widespread energy poverty illustrates how different the energy world looks outside Norway. We have been blessed with energy riches hard to imagine for an outsider.     

Most countries are not like Norway. A hundred years ago countries in Europe developed their industry based on coal.  In Norway we developed our hydropower.   To this day, we benefit from this every time it rains in the mountains.  

Coal has a high energy intensity, it is cheap and it is universally available.  Therefore coal still covers more than one-fourth of the World’s energy mix.  But coal has a high carbon content and consequently stand for 40 per cent of global CO2 emissions.

On the other hand, the carbon footprint of natural gas is much smaller than coal. In power production, natural gas emits up to 70 per cent less CO2 than coal. In the EU, oil and coal account for 30 per cent of the fuel input in power generation, while gas accounts for only 17 per cent. Thus there is a large potential for coal substitution and increased use of gas in Europe.  

For most countries, natural gas is rightly seen as a bridge from their present coal based economy to a low-emission future. Yet, it is more than that. Gas power is a back-up for intermittent renewable power production in countries lacking the flexibility of hydropower. Last winter, Europe experienced that during periods with extreme cold, there was no wind. With an increasing share of renewable energy, more gas power will also be needed for the periods without wind and sunshine.

As the cleanest of fossil fuels, natural gas should be considered as a fuel for decades to come. When CCS on gas fired power plants becomes commercially available, I believe the argument for natural gas will be further strengthened. Gas will have a long-term role to play, also in a low-emission future.   

Natural gas production in Norway has grown more or less uninterrupted for 20 years to a level of one hundred billion cubic meters. Currently, only Russia export more gas than Norway. 

And there is a considerable remaining resource potential on the Norwegian Continental Shelf. Only 20 per cent of the total recoverable gas resources have been produced. And large part of our Shelf has not been explored for oil and gas yet. Thus, Norway has both the resources and the infrastructure to be a significant gas exporter for a very long time.

I am surprised to hear that the IEA is projecting a glut of natural gas for the next 10 years.  This is contrary to the message I get from the industry and other market analysts who say that much of the gas surplus has already disappeared. Hence, I am particularly looking forward to hear Dr. Birol’s reasoning on this matter.   

The way I see the future, is that the world needs more energy, it needs cleaner energy and it needs reliable energy supplies. Natural gas meets all these criteria and is also a key measure to mitigate climate change in countries relying on coal.

I am proud to represent a Government which follows the path to a more climate friendly future, as set out by the IEA. Our approach is:

• First, to strengthen our energy efficiency programs
• Second, to strengthen our efforts in renewable energy
• And third, to mature key future energy technologies such as Carbon Capture and Storage and offshore wind turbines. 

Let me add a few remarks on these crucial issues. 

As for the two first points, we have ambitious policies to realize the potentials for using energy more efficiently and for producing more renewable energy. The main vehicle to promote energy efficiency and renewable energy is Enova. Enova is our main agent in the transition to a more efficient and environmentally friendly national energy supply and use. Over the last years Enova’s budget has increased substantially. In 2011 Enova will receive almost 2 billion Norwegian kroner.  

The Government also promotes energy efficiency through other measures like stricter building codes, eco labels and standards, targeted duties and taxes etc. Although hydropower generates most of our electricity – we still push for more renewable energy. In this context, the planned common green certificate market between Norway and Sweden will play an important role.  

Next, we must meet the challenge of securing a sustainable future energy supply by reducing emissions from the production and use of fossil fuels. This year, the Norwegian Government is allocating 3.3 billion kroner towards CCS; including the projects at Mongstad, the transport and storage project, international cooperation, as well as financial support to research and development of CCS technology.   

The Norwegian Government’s CCS-policy is not only about carbon capture from Norwegian industry:  It is also about contributing to the development of commercially viable carbon capture technology, that can be used by many other countries to reduce greenhouse gas emissions from the world’s increasing energy production. 

Finally, Norway shall remain a world leader in safe and environmental sound extraction of oil and gas. We have one of the world’s lowest emissions per unit oil produced and we have minimized the use of chemicals with negative environmental effects offshore. But we are not at the end of the line – further improvement is needed.  

To sum up and conclude: Securing energy supply and speeding up the transition to a low-emission energy system calls for radical action by governments. 

This is challenging. Yet, I remain an optimist. Just consider how fast the internet and information technology have transformed our society in the last 20 years. I see the IEA’s projection for the coming years in the same light: That improved energy technologies and a transformed energy path is certainly required – but also possible if we are ready to face the challenge.  

Thank you for your attention!