Speech at Offshore Northern Seas 2010

Your Majesty, ladies and gentlemen

It is a pleasure for me to be here at Offshore Northern Seas, and to speak to such a distinguished audience.

I have been asked to speak about the energy challenges the world is facing today.

Energy has been a major issue on the international political agenda for a good many years now. This reflects the vital role energy plays in modern societies.

It also reflects the fact that climate change – the overriding environmental problem of our time – is closely interlinked with the production and use of energy.

The energy challenges we are facing are:

- to provide more energy at affordable prices,
- to provide secure and safe energy supplies
- and to provide cleaner energy. 

These are demanding tasks.

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In recent decades, we have seen impressive growth in energy production. Global production of primary energy has increased by about 40% since 1990.

This would not have been possible without the expertise, inventiveness and capital resources of the energy industry.

Meanwhile, economic growth, urbanisation and population growth are driving energy demand even higher.

The world population reached six billion at the turn of the century. In five years time, it is likely to be one billion higher.

Many of these people do not have access to basic energy services.

One and a half billion people do not have access to electricity.

Two and a half billion people use biomass for cooking in ways that have harmful effects on health and the environment.

In India, per capita energy use is only five per cent of energy use in Norway.

China has now passed the US to become the largest energy consumer in the world. But per capita oil consumption in China is only 10% of the level in the US.

China is not alone. India, Brazil and Indonesia also have large populations and are enjoying strong, sustained economic growth, but per capita energy use is still low.

Population growth is expected to continue and per capita energy use will need to rise if we are to reduce global poverty.

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Today, fossil energy meets about 80% of our energy needs. And it will probably meet the major part of our energy needs for a long time to come.

Renewable energy sources are growing fast, but can still only meet a small proportion of energy needs.

Today, there are no competitive alternatives to oil for transport. Oil provides 95% of the energy needed to move people and goods.

Coal has been the fastest growing source of fossil energy in the last decade. The world’s coal resources are huge. China and India and many other developing countries have large domestic coal deposits which they will continue to exploit for economic and energy security reasons. 

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Energy-related CO2 emissions account for nearly two-thirds of global greenhouse gas emissions. Unless effective policies are implemented, energy-related emissions are projected to rise by over 50% by 2030 according to the Intergovernmental Panel on Climate Change.

The world is obviously on the wrong course. The ice in the Arctic is melting, sea levels are rising, the globe is warming.

We need to generate less CO2 but produce more energy. How can this best be done?

There is no simple solution, no single technology or policy measure, that can solve all our energy problems at once.

But whatever course of action we follow, I strongly believe that the guiding principle should be cost effectiveness. We need to spend our money wisely so that we achieve the biggest possible emission reductions.

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Last year’s climate summit in Copenhagen did not achieve as much as we had hoped for.

But even though no legally binding agreement was reached, we did take important steps forward.

First, we confirmed the need to limit the rise in global temperature to 2 degrees Celsius.

Second, we confirmed that deep emission cuts are required and that effective actions must be taken – in both developed and developing countries.

Third, developed countries confirmed that they will provide additional funding for climate actions in developing countries.

The Norwegian Government is focusing on three key aspect of the Copenhagen Accord: funding, reducing deforestation, and carbon capture.

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We will not achieve the necessary reductions in greenhouse gas emissions unless we can mobilise sufficient resources.

This is why funding is a key issue. And this is why I have agreed to co-chair the UN Secretary General’s Advisory Group on Climate Change Financing.

Funding is also a question of equity. The rich world has been responsible for the bulk of emissions in the past, and we have no right to deny other nations the right to develop.

We need to create financial flows for climate actions in developing countries.

The need for funding is so great that it cannot and will not be met by governments alone. We need to mobilise the private sector too.

The key is to put a price on carbon. Carbon pricing has a double effect:

- It provides polluters with incentives to reduce emissions and develop climate-friendly technology.

- In addition, it generates revenue that can be used for climate actions in developing countries.

I strongly believe that establishing a carbon price is one of the most powerful tools available for reducing greenhouse gas emissions.

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The forests of the world are nature’s own carbon capture and storage facility.

The carbon stored in world’s forests is equivalent to more than 100 times the total annual CO2 emissions from energy use.

Reducing deforestation and forest degradation can provide the largest, fastest and cheapest cuts in global emissions.

Reducing deforestation could enable us to achieve up to one third of the emission reductions needed by 2020.

In today’s global markets, forests are worth more dead than alive.

We must change this. It must pay to not cut down trees, to leave them standing.

The Copenhagen Accord calls for the establishment of a forest mechanism to reduce emissions. Norway is playing an active role in this process. Several countries, including Norway, have pledged 4 billion US dollars over the next couple of years to prevent deforestation. 

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The Norwegian Government is also allocating considerable resources – both financial and political – to the development of carbon capture and storage technology.

Carbon capture could reduce CO2 emissions from coal- and gas-fired power plants by up to 90%.

About 20% of the required emission reductions can be achieved by carbon capture.

We know carbon capture works, but large-scale operations are still at the demonstration phase.

High costs are a significant hurdle for this technology. A lack of funding is also holding back the deployment of carbon capture technologies.

Our test centre at Mongstad will be the largest of its kind in the world when it is finished in 2012. Shell and Sasol are involved as partners together with Statoil and the Norwegian state.

The centre will test various technologies used on flue gases containing different CO2 concentrations.

The next phase is a full-scale carbon capture facility at Mongstad. The complexity of this project has made it necessary to extend the planning period. Nevertheless, the plan is to make an investment decision in 2014.

The vision is for carbon capture to allow the production of clean energy from gas- and coal-fired power plants. For the global energy situation, nothing could be better.

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Greater use of natural gas to replace coal could play a major role in meeting the growing need for clean, safe and reliable energy supplies.

Moreover, developments in the gas market in recent years have strengthened the case for gas.

Firstly, the unconventional gas revolution, mainly in the US, has increased the resource potential of gas dramatically. Gas resources are abundant and could last for 250 years at the current consumption rate.

Secondly, the increased availability of liquefied natural gas all over the world has made gas supplies much more secure and reliable.

Natural gas has a lower carbon footprint than other fossil fuels.

Natural gas is rightly seen as a bridge from the present fossil fuel world to a low-carbon future. But it is more than that.

The world needs more energy, it needs cleaner energy, and it needs reliable energy supplies. Natural gas meets these requirements.

Natural gas is an area where Norway has strong economic and industrial interests.

We are the second largest gas exporter in the world.

There is a considerable remaining resource potential on the Norwegian continental shelf. Only 20% of the total recoverable gas resources have been produced.

We thus have the resources to remain a significant gas exporter for a very long time. And we can sell more gas if the demand is there.

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Your Majesty, ladies and gentlemen

Allow me to take this opportunity to comment on the blowout in the Gulf of Mexico and what it could mean for petroleum activities in Norway.

This disaster is clearly a wakeup call for the offshore industry.

We can already see that the environmental, economic and human consequences of the accident are huge. However the full picture of the causes and consequences will not be clear until a later stage.

This disaster shows that things that in theory should not happen sometimes do in practice. We learn from this lesson, also in Norway where safety and environmental standards are among the most stringent in the world.

The causes must be identified and analysed, and measures to prevent new accidents must be devised.

Meanwhile the blowout has increased concern about the prospective oil regions off the Lofoten and Vesterålen Islands in North Norway.

The Government started a process that will put more data and knowledge on the table. A stepwise and knowledge-based procedure is the only way to strike a good balance between petroleum activities and fisheries and environmental interests.

Once it has acquired sufficient information, the Government will decide on the way forward. I’m confident that we will find good solutions for all the interests involved.

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Your majesty, ladies and gentlemen,

We are facing major challenges in the energy sector. If we are to meet our energy needs and achieve our environmental goals, both the energy industry and the government must do their part.

The development of the petroleum sector in Norway has been a success story. The sector now accounts for more than 20% of gross domestic product, and it provides more than 30% of state revenues.

Companies with a strong base on the Norwegian continental shelf are also successful on the international scene, with a strong track record both in technological developments and in the safety and environmental field.

The main reason for this success is of course the untiring efforts of the industry itself. But it is also due to good relations between the industry, the unions and the Government.

The Government is responsible for providing stable framework conditions. Including a tax system that gives us a high income but only when profits are high.

We must maintain Norway’s high environmental and safety standards. These of course entail costs for the industry, but it has also become clear that they can provide a competitive advantage in the long term.

I wish you a successful conference and fruitful and interesting discussions.
             
Thank you.