The Energy Trilemma

Speech by the Minister of Petroleum and Energy, Mr. Terje Riis Johansen at the Oslo Energy Forum, 04.02.2011.

Your Excellencies, Minister, Ladies and Gentlemen.

This morning’s topic was the energy trilemma - cutting carbon emissions and energy costs while securing the energy supply.

Faced with a somewhat similar challenge more than 30 years ago, President Jimmy Carter called for increased energy independence and further development of alternative energy sources. It is tempting to claim that history repeats itself. 
However - today’s tale of the trilemma contains new chapters:

• On millions of people lifted out of poverty.
  
• On changes in the global order.
  
• And on the urgency of the climate change.  

Considering these new elements, it might be more accurate to use Mark Twains words: “History doesn't repeat itself, but it does rhyme."

I am sure this morning’s distinguished panel has exhausted the topic.

I do however want to share with you the Norwegian perspectives on the energy trilemma:

• A greener world is imperative. I work every day to make sure that our petroleum and energy policy contributes to this objective.
• Norway shall continue to be a stable supplier of oil and gas in order to contribute to energy security.
• Norway is a high cost country. To reduce the cost of greener energy production, we strive to develop our competence and technology in this area.       

Let me briefly elaborate on our achievements to solve the trilemma:

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First, Norway will pull its weight in order to meet the global energy demand.
We will continue to provide the industry areas through our licensing rounds.

Recently all pre-qualified companies have been invited to nominate blocks to the 21st licensing round. To maintain the activity level on the Norwegian continental shelf, I will seek to give the industry access to attractive and less explored areas. Awards of new production licenses are planned in the spring 2011. 

Two weeks ago I awarded 50 production licenses in our predefined areas. These are mature areas with known geology. It is important that we discover and develop resources before existing infrastructure shuts down.

There is a strong interest from the industry in both our mature and immature areas. New companies contribute greatly at the Norwegian continental shelf - especially in mature areas. The continued presence of the super majors is however crucial for the diversity in the Norwegian petroleum industry. We need companies with broad experience and large capacity when facing future oil and gas challenges. 

A predictable and sound licensing policy is important to limit the decline in our production. I recognize the industry’s need for new areas. The government will decide on the question of access to new areas in the Norwegian Sea and the Barents Sea in the updated integrated management plan, which will be presented this spring. 
 
As for the latter, one of the most inspiring events last year was Norway signing the agreement with Russia on the maritime boarders in the Barents Sea and the Polar Sea.

As a farmer I know the importance of enlarging one’s property. This historic event will add new areas to the Norwegian continental shelf. The agreement is promising for future petroleum activities. Ratification of the agreement still remains, but a natural step after ratification is to start mapping the area. 

The activity level on the continental shelf is high. I expect this spring to be a busy one due to all the development plans we will receive. This proves to me that companies believe Norway has a predictable framework for their long term investments.

This spring I will present a white paper on the petroleum policy for the Storting.
Broad political consensus and stability has been fundamental for the success of the Norwegian oil and gas policy.

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Secondly, I would also like to use this occasion to highlight the role of natural gas in the energy mix- the cleanest of the fossil fuels. Natural gas might be the answer to all the three legs in the energy trilemma – costs, carbon cuts and energy security.

The carbon footprint of natural gas is much smaller than for other fossil fuels.
In power production, natural gas emits up to 70 percent less CO2 than coal.
In fact, Europe can achieve the target of 20 percent reduction of CO2 emissions simply by replacing all use of coal with gas in electricity production – without any subsidies! 

Natural gas is a rich resource which has grown with the unconventional gas revolution in the US. Global resources could last for 250 years with current gas consumption.  

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Third and finally, the vision of the Norwegian Government is that Norway shall be a leader in renewable energy and carbon capture and storage (CCS).

We develop considerable amounts of hydropower, and we  promote other types of renewable energy production. In order for cleaner energy solutions to be truly competitive, costs must be brought down and new ideas developed. A key part to the energy trilemma is to increase investments in research, development and demonstration.

We have therefore set up new research centres which focus on offshore wind, CCS, bioenergy and solar cell. Last but not least, I strongly believe carbon capture and storage is part of the answer to how we meet energy demands and the call for CO2 reductions at the same time.

We work with the aim of establishing a full scale carbon capture and storage facility at the gas-fired power plant at Mongstad.Next year we will also complete building a Technology Centre at Mongstad. Our efforts at Mongstad are a vital part of the Norwegian government’s energy and climate policy.

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One of the most difficult political challenges in Norway this year has been related to the construction of a power line in the western part of Norway. The issue highlights that balancing between costs, environment concerns and energy security is valid and necessary for all energy forms and usage. Looking at the year ahead, it is my sincere hope that we all through hard work manage the art of balancing.

That is the only way forward in solving the energy trilemma and the only way of avoiding history repeating.

Thank you for your attention!