Norwegian policy and capabilities for oil and gas activities in the High North

Speech by State Secretary Per Rune Henriksen at The arctic conference - INTSOK’s 10th annual Russian-Norwegian Oil and Gas Conference 25.01.12. Check against delivery.

Excellencies, Ladies and Gentlemen,

It is a pleasure for me to speak here at The Arctic Conference INTSOK’s 10th annual Russian – Norwegian Oil and Gas Conference.

The High North is one of the focal points of the present Government. Our aim is to work diligently to safeguard a sustainable development in our northernmost regions. This implies expanding economic activities to continuously develop society, employment, growth and welfare, in due consideration of environmental concerns. It also implies the importance of a good relationship to our neighboring countries based on mutual respect and appreciation.

The relations between Norway and Russia have been strengthened through the treaty on maritime delimitation in the Barents Sea and the Polar Ocean, which entered into force in July last year.

Our common target is sustainable management and responsible cooperation in the Arctic. With this treaty, we are setting an example worldwide of how delimitation disputes can be resolved peacefully, in accordance with international law and within the framework of modern international jurisprudence.

The treaty also covers cooperation in these areas – not least with regard to the exploitation of any transboundary petroleum deposits that are discovered. Such deposits shall be exploited as one unit. I look forward to our further cooperation in this respect.

The treaty creates new opportunities for petroleum activities and cooperation in areas of the Barents Sea that have not yet been opened to such activities. This is a new chapter in our cooperation – and in our energy dialogue. 

What is beneath the seabed in this area is not yet known.

Norwegian Barents Sea
What we do know is that it takes time to develop a new petroleum province. In Norway the petroleum activities on the continental shelf have over time developed from the South – and stepwise all the way to the High North.

More than 30 years ago the Norwegian Barents Sea South was opened for petroleum activities. The first discovery, the Snøhvit gas field was made about 30 years ago.  Snøhvit came into production 5 years ago – while the oil field Goliat which was discovered in the year 2000 is expected to come on stream next year.

The Skrugard and Havis discoveries are expected to be the third profitable development in the Norwegian part of the Barents Sea.

The developments in the Barents Sea show that we now have activities here in the whole upstream petroleum chain – through the producing Snøhvit field, the Goliat feld under development, new discoveries to be developed and a lot of exploration to be carried out in the coming years. We also see a huge interest from the oil companies in the licensing rounds. And last but not least; the process of opening the Barents Sea south-east is currently going on at full speed.

As I mentioned, the High North is one of the focal points of the Government. The petroleum industry is delivering concrete, new activities here. This work shall be continued.

The fact that we now – after thirty years – finally see the contours of long term and significant petroleum activities in the Barents Sea also implies large possibilities onshore Northern Norway. If we find the resources we think in this area, the petroleum activities will really affect developments here in the years to come.
However, this “if” is very important: the question of whether these resources are in fact located in the Barents Sea – and whether we manage to find them. New, profitable discoveries will decide the activity level in this new petroleum province – both offshore and onshore as onshore activities depend on the level of offshore activities.

Norwegian Industry Competence
Competence and capabilities in the petroleum industry is important from exploration through exploitation.

Exploration and exploitation of oil and gas resources on the Norwegian Continental shelf have always been demanding. Fields have been located in deep water or in remote areas with no infrastructure in place. Technology development has been necessary to make fields economic or if at all possible to develop.

Forty years of challenges on the Norwegian Continental Shelf and dedicated research and development have created an innovative industry in Norway. The Norwegian continental shelf is known for being a “laboratory” for testing new technology.

Subsea production systems and multiphase flow over long distances and in deep waters, and subsea compression are a few technology areas where the Norwegian industry stands out. These are also technologies well suited for operations in Arctic areas.

Traditionally oil and gas production will separate oil, gas and water at the wellhead before transportation. This is an expensive solution offshore. Untreated gas was first transported directly to a gas processing plant on shore in 1996 (Troll Oseberg gas to Kollsnes) a distance of 65 kilometers and the wellhead was at a water depth of 300 meters. At the time this was a breakthrough after 10 - 15 years of research.

Additional technology advances have since resulted in the development solutions on the Snøhvit gas field in the Barents Sea. Snøhvit was discovered in 1984 and the field would have been uneconomic without a subsea solution and multiphase flow. It started production in 2007 and supplies our only LNG facility with gas. The well stream containing natural gas, CO2, NGL and condensate is transported through a 160 kilometer long pipeline to Melkøya for processing and export.

Another technology step was demonstrated when the operator Statoil on behalf of the licenses ExxonMobil, Total and ENI recently submitted a field development plan for subsea compression at the Åsgard field. The closer to the wellhead the compression can be done, the higher the efficiency and production rate. The aim is to increase the recovery factor of this field substantially. Other fields on the Norwegian continental shelf are planning similar technology tests and qualifications.

A quite different technology which was first introduced forty years ago, is the concrete structures for oil and gas developments in Norway. The Norwegian company Kværner has since been a lead contractor in more than 20 major projects world wide – including projects at the Sakhalin field offshore Russia and in Canada. Concrete structures provide numerous potential benefits, particularly robustness to meet Arctic environmental challenges.  

The engagement and interaction between oil companies, industry and research institutions in Norway have been fundamental in finding solutions to technology challenges. I am truly proud of the way these players have interacted and are bringing world class technology and technological solutions to the market.
Joint projects

This leads me to the specific challenges that we face in the Barents Sea and how North Sea industry practice needs to be taken into account in relation to these challenges.

The world leading Norwegian Classification Company, DNV, was five years ago engaged to lead a project to examine the challenges connected to offshore petroleum activities in the Barents Sea.

Harmonization of Health Safety and Environmental standards between Russia and Norway would contribute to a more uniform safety level across the border, and to support international industrial cooperation across the Barents Sea.

A total of one hundred Norwegian and Russian experts have been involved in the process. International standards for the Barents Sea were recommended in the final report approved by the project steering committee in March 2010.

The next phase has developed into an international joint industry project, in order to draw on a wider source of competence to address challenges in the offshore Arctic as such. The results from this phase will be industry guidelines that address critical issues not sufficiently covered in the previous work.

This project has become an important forum for development of Arctic industry guidelines. The work is both financed and conducted by experts from the international oil and gas industry. Technical Committee 23 under management of Gazprom and VNIIGAZ are the Russian partners in the project, which is also part of the Barents 2020 efforts initiated by the Government as part of its strategy for the High North.

I understand you will hear more about this project in a presentation tomorrow.

Likewise, INTSOK will in 2012, with the support of the Norwegian Government and Norwegian and Russian oil and gas industry, launch a project which will address possible common technology challenges in the Barents Sea.

I am pleased to be given this opportunity to talk to you about our common Arctic challenges. Our long and peaceful relations make an excellent basis for solving our future challenges.

I am convinced that this conference will further add to this.

Thank you for your attention