Speech held at Arctic Frontiers

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Dear audience,

It is a pleasure for me to speak here at the Arctic Frontiers Conference for the first time, and to address issues that are important to Norway as a significant producer and exporter of oil and gas, and renewable energy. Both regarding fossil fuels and renewable energy, a lot is happening in the northern parts of Norway these days and this is a good occasion to elaborate on this.

The petroleum activities in Norway are to my mind a success story. It is the economic engine of our society and the basis for much of our industrial developments, growth and welfare. In addition, Norway is providing the world with energy by being the second largest gas exporter and the sixth largest oil exporter in the world. This gives us opportunities, but also responsibilities on the world’s energy markets.

I am proud to state that these activities are now significantly contributing to the developments and economic growth in our High North. Looking at the Arctic at large, my opinion is that sustainable petroleum activities already are – and will continue to be – increasingly important to the future of this region.

Looking at the global picture, my point of departure is that the world needs more energy. This is important to global economic growth, and to get more people out of poverty. At the same time, we need to handle the challenge of climate change. We need to address these challenges simultaneously and in a balanced manner. It is impossible to solve one but not the others.

The world will be dependent on fossil fuels for decades to come. Also within the IEAs 2 degrees scenario, the global need for fossil fuels will be almost as high as today in 2030. It is then important that we produce the fossil fuels as clean as possible. The Norwegian petroleum sector is a world champion when it comes to environmentally friendly and efficient offshore petroleum production. We will continue the work to make our petroleum industry even cleaner.

Being among the largest energy exporters, responsibilities follows – but it does not imply that we should not move our own society into an even more renewable future.

Therefore, in addition to our efforts on oil and gas, we also work hard to increase our production of renewable energy. Through international obligations, implementation of a system with green certificates and other measures, we have committed ourselves to highest level of renewable energy in Europe. As an example, our level of renewable energy will be 340 percent higher than the European average if Europe reaches its targets. Some of the growth in the production, as well as consumption, will come in the northern areas.

This will demand a better grid, and there are plans for new power lines into the northern counties of Norway.

In the Norwegian context, there are indeed good reasons to speak about the “energies of the high north”, which is the title of this year’s conference.

When we talk about future Norwegian petroleum production, many developments in 2011 gave reason for optimism.

I had only been Minister for a few weeks last April when the large discovery on the Skrugard prospect north-west of Hammerfest in the Barents Sea was made. Recently another 200 – 300 million barrels of oil equivalents in the Havis prospect were discovered in the same production licence.

Johan Sverdrup has the makings of being one of the largest oil discoveries in Norway – and this even in one of the most well explored parts of our Continental Shelf.

At present, the activity level on the Continental Shelf is high. The Ministry approved ten new developments last year. The developments include everything from small, time-critical projects to the revitalisation of fields in the Ekofisk-area at the cost of 65 billion kroner. Total investments in these projects are more than 100 billion kroner. Last week I received plans for 49 billion kroner.

Last year, Norway also increased its Continental Shelf by 87.000 square kilometres through the new delimitation agreement with Russia in the Barents Sea. The agreement includes specific provisions for cooperation between Norway and Russia in case an oil and gas discovery is made that could extend across the delimitation line.

At the moment geological mapping is taking place here. We are also carrying out an impact assessment. These are the two elements in the process of opening this area for petroleum activities. The Storting – our parliament – will take the decision to open it or not. My ambition is to submit a proposal on the issue to the Storting in the spring of 2013. This is concrete follow-up of the High North being a focal point of this Government.

It has taken a long time to develop the Barents Sea into our third petroleum province. Thirty-two years have passed since acreage in the Barents Sea first was opened for petroleum activities. Thirty years have gone by since the discovery of the Snøhvit gas field. A lot has happened since then; the number of students at the University of Tromsø has for instance increased from 2000 to 10.000. The production of Snøhvit commenced in 2007.

The Goliat oil field was the second significant discovery in the Barents Sea. It was made in the year 2000 – nearly twenty years after the Snøhvit discovery. We expect production to start next year.

Recently, the Skrugard and Havis discoveries were made and will constitute the third profitable development here.

This illustrates the time span it could take to develop a new petroleum province. But the important thing is that we now, for the first time, have activities in the whole value chain in the Barents Sea – from the opening of new areas, many exploration wells to be drilled, developments in progress and under way and last – but not least - ongoing production.

We also look at other regions of the High North. The opening process for the continental shelf around Jan Mayen is going ahead as planned.

My plan is to also submit the question of opening of this area for petroleum activities to the Storting in the spring of 2013.

The Ministry is also gathering additional knowledge on the effects of petroleum activities in unopened areas in the north-eastern part of the Norwegian Sea. The program for the work was decided before Christmas, and it will go on through 2012.

After thirty years we see the prospects of long term and significant petroleum activities in the Barents Sea. This implies large possibilities for Finnmark and Northern Norway The activities have already generated extensive ripple effects. The large ripple effects that are generated by the petroleum activities are mostly stemming from deliveries of goods and services in the development phase and during the production periode of fields. This has been our experience historically in Norway. The challenge for regional businesses is to develop their competence and capacity so as to be able to compete for these contracts. Through increased interest, more exploration, more discoveries and developments, large ripple effects will render also in the years to come. Without resources to develop – no ripple effects. I firmly believe that we will continue to see success stories coming out from this part of the country.

Another area that requires action is education and competence building. The youth must – to an even larger degree than today – educate itself both on the undergraduate and graduate level to meet the needs of the petroleum and energy industry in the northern regions.

Northern Norway has become the land of opportunities in oil and gas!

I have been challenged to be even clearer when it comes to new opportunities in the north of Norway. I have been very clear. The White Paper we put forward last June had development and opportunities going north as a main message. We have reached an agreement with Russia. The plan we put forward in March meant new areas and the start of impact assessments in the Barents Sea and around Jan Mayen. We have followed up with money for geological mapping.

As we speak, Statnett is working to develop the largest grid project in Norwegian history. The APA round released last week was good news for the Norwegian Sea and the Barents Sea. We experience large interest when it comes to the next licensing round. We are working towards strengthening our own governmental bodies in this part of the country. We gather information to help all political parties when it comes to a decision on Lofoten and Vesterålen. We have put in place a system for investments in renewable that will give the region rich opportunities. We now assess different ways to strengthen the regional infrastructure on gas. And the government works to develop education and infrastructure further, in cooperation with the region itself.

I have clear expectations that the industry that have been given licenses, and which I will give new licenses, will look to the region to create ripple effects. Our experience is that geography matters.

The Government will do its part. But a government can do only so much.

My main message here today is that you all need to grasp these opportunities with both hands and transform them into action.

When it comes to whether or not to increase export capacity for gas from the Barents Sea, the development is interesting. The owners are now working to see whether there is a basis for further development of the Snøhvit field. The solution will also depend on what is considered to best promote further developments in the Barents Sea as such.

Before we make our choices, we need to be able to fully understand the consequences of these choices.

Last week I received an analysis of the future needs for gas infrastructure developments at the Shelf.  This work is an important contribution to ensure that robust solutions for new infrastructure are chosen.

I will, however, also underline what this report is not: It does not consider the market potential. Consequently, the future price of LNG as compared to the price of gas transported by pipeline has not been analysed. There could be large differences in prices in this respect.

In addition, the report does not consider the potential for future gas demand in the European market. These issues must of course be taken into account in any future analysis of the future development of gas infrastructure from the Barents Sea.

The main question will remain as it always does in relation to these

issues: Whether or not there are sufficient gas volumes available for transportation that can carry the cost of building new infrastructure.

This is a “chicken and egg” issue. No export capacity – no gas. No gas – no export capacity. Another prerequisite is that there has to be a market on the European continent demanding more natural gas. Further infrastructure investments in Norway in the range of hundreds of billions of kroner require real security of demand. If there are any ambassadors from Europe present here today, I hope they listened carefully to this message.

In Norway we have to parallel licensing rounds. The so-called APA rounds held yearly in mature part of the Shelf. And the numbered rounds, normally held every second year, in the more frontier parts.

Last week I awarded sixty new production licences in APA round of 2011 – of which four were in the Barents Sea and twenty-two in the Norwegian Sea.

We awarded twenty-four licenses last year in the twenty-first licensing round – twelve in the Barents Sea and twelve in the Norwegian Sea. Last autumn I invited all oil companies active in Norway to nominate the areas they recommend for inclusion in the upcoming twenty-second licensing round. I am happy to announce today that we see a high interest for new licences in the Barents Sea as 181 blocks have been nominated here. I plan to announce the twenty-second licensing round in the spring, with awards early in 2013.

I have spent much time on the petroleum sector, but as mentioned in my introduction – much is also happening and we have high focus on our renewable energy sector.

Renewable energy can and will play an increasingly important role in the Arctic areas. In the Norwegian Arctic areas there is a large potential for further renewable energy production, which in turn can give more growth and jobs in the region. There is a large potential both wind and hydropower, and we expect production to increase considerably in the years to come. Those familiar with the arctic areas knows it there are both water and wind, so the potential is there!

A precondition for this to happen is a better grid. In large parts of the counties of Troms and Finnmark the high voltage grid is close to reaching its capacity limit. Much of the existing grid has a voltage of only 132 kV.

This is why Statnett is working on two new transmission lines on 420 kV, going from Ofoten to Balsfjord and from Balsfjord to Hammerfest.

Together these lines cover a distance of 530 km. Statnett has applied for licenses for both lines and the Norwegian Water Resources and Energy Directorate (NVE) is currently handling the applications.

Statnett expect the lines to be in operation from 2015 and 2017 at the earliest. This will not be possible without cooperation and good will in the region. This is another challenge I have for you.

The new grid will considerably improve security of supply in the region. They are required for being able to supply new or increased demand from petroleum installations such as Snøhvit and Goliat.

Increased grid capacity is also necessary to allow for new, larger renewable energy production and increased larger demand in local industry, such as the mining sector.

We expect to see a lot of activity in the Norwegian Arctic regions in the years to come. The authorities have already received a number of applications for both hydropower and wind projects, and the number of applications is expected to grow.

We now have a new support scheme and new binding targets in place. The renewable directive lays down a target for Norway’s renewable energy share of 67.5 percent by 2020. This represents an increase of around

9.5 percentage points from 2005. Renewable energy will thus account for more than two-thirds of Norway’s energy consumption in 2020. This is a far higher proportion than in any EU country.

A new support scheme is also in place. Norway and Sweden established a common market for green certificates 1 January this year with a common goal of developing 26,4 TWh of new production by 2020. The new scheme will be in operation until 2035. This gives a stable and predictable framework for the industry. The scheme is an important tool to unlock the large potential for renewable energy production in the Nordic areas.

Through our acceptance of international obligations and implementation of green certificates we have bound ourselves to using the highest level of renewable energy in Europe. As an example, our level of renewable energy will be 340 percent higher that the European average.

This will mean local investments in the range of several hundred billions. I will mean tens of thousands of new jobs and rich opportunities. And it will not come without grid, dams and mills that we will be able to see.

Summing up, I hope Northern Norway will become an even more important part of our energy future – a future I hope to see emerging at large in the Arctic as a vital part of a sustainable development. The resources, political will and opportunities are here. Now we need to work together to achieve common goals.

With these words I thank you for the attention and wish you a fruitful conference here in Tromsø.