Speech at Offshore Northern Seas 2014

Your Majesty, Ministers, ladies and gentlemen,

It is an honour for me to be here at the Offshore Northern Seas – the ONS - and to speak to such a distinguished audience.

Norway became a petroleum-producing country back in June 1971 – two years after discovering the giant Ekofisk field. Later that year David Bowie released his song “Changes” - which is, coincidentally, also the theme of this year´s conference.

A lot has certainly changed since the very first ONS conference was held here in Stavanger 40 years ago.

Since the beginning in 1974 ONS has evolved into one of the world’s most important oil, gas and energy meeting-places for key industry players, ministers and officials from energy-producing countries.

The biggest question facing all of us here today is the dual challenge of how to meet the world’s growing demand for energy, while at the same time addressing the climate issue.

One of the Millennium Development Goals is to eradicate extreme poverty and hunger. In the years to come, millions of people will get access to water, food and electricity. This will demand energy.

Developing countries will leapfrog development steps and avoid using polluting technology from the last century. Despite this, the world’s demand for energy will increase and fossil fuels are needed to cover it. 

On the other hand, the International Panel on Climate Change – the IPCC – leaves us with no doubt: Increased levels of CO2 in the atmosphere leads to increasing temperatures, a higher sea level and more extreme weather. With the current rate of climate change, the consequences can be devastating.

We have no time for hesitation. There is important work to be done in the running up to the UN Climate Conference in Paris in 2015. We need to act now.

Main tool - A global price on emissions
While we, the politicians, can and should create the framework, the industry and the research community, must drive the technological changes showing the way towards a low-emission global economy.

The energy system is huge and complex. Therefore it takes time to change it. Fossil fuels cover more than 80 percent of world energy demand – and will continue to be the dominant part of the energy mix for decades whether we like it or not.

Luckily, the rate of growth in renewable energy in many markets and countries is striking and encouraging.

To strengthen this growth towards a sustainable development, we need a robust and predictable long-term framework for all market participants. Uncertainty about policies and lack of confidence in the market may distort long-term investment decisions.

Therefore, the principle of setting a global price on emissions should be at the heart of such a policy.

To ensure economic competitiveness over time, market-based solutions and further integration of energy markets must be at the core of our energy transition.

Pricing Greenhouse gas-emissions is necessary to mitigate climate change. Polluters will pay the price and will have incentives to reduce their emissions and to invest in low-carbon growth.

The Norwegian experience - CO2 tax and technological development
Norway introduced a CO2-tax as early as 1991. We are also part of the EU Emissions Trading System, ETS. The purpose of the ETS and the tax is to encourage cost-efficient CO2 emission reductions.

Together, these tools have contributed to reductions through the use of more efficient technology, and through more efficient developments and operations.

A good illustration of how pricing emissions has had an effect is the Norwegian Sleipner Project.

When the Government introduced the CO2 tax in 1991, the Sleipner Field was under development. The field contained CO2-rich natural gas, and in order to meet sales specifications in Europe the CO2 content in the natural gas had to be reduced.

This spurred the scientists and project developers in the Norwegian oil company Statoil to introduce a novel idea. Their solution was to store the CO2 1000 meters below the seabed, instead of venting it. 

That was successful. Since the start up in 1996, one million tonnes of CO2 have been stored annually from the Sleipner field.

Overall - our policy has been to let the companies face strict safety and environmental regulations, based on sound resource management principles.

In total, there are indications that pricing Greenhouse gas-emissions has reduced emissions from the petroleum sector by more than 5 million tonnes CO2 annually, measured as avoided emissions.

Norwegian R&D institutions, suppliers and service companies have also played a significant part in delivering the necessary systems and equipment to meet new and tougher requirements.

Today, the production on the Norwegian Continental Shelf (NCS) is at the forefront when it comes to using technological solutions that minimize the impact on the environment.

Currently, Norway has one of the world’s lowest CO2 emissions per barrel of oil equivalents produced offshore.

The CO2 tax combined with dedicated government funding for R&D has sparked industry investments in new technologies that also have a global market potential.

Replacing coal with natural gas

While we should strive to reduce emissions, we should also make clever choices between different sources of energy.

In that context, natural gas is by far the cleanest of the fossil fuels. The carbon footprint of natural gas is much smaller than coal. In power production, it emits about 50 per cent less CO₂. Replacing old coal plants with new and efficient gas fired ones, will deliver even bigger reductions.

Half the petroleum Norway produces is natural gas. Almost all of it is destined for Europe, where we supply some 20% of demand, second only to Russia.

Norway both has the resources and the infrastructure to be a significant exporter of natural gas for the foreseeable future.

Natural gas can also play an important transitional role towards a low emission future as a reliable and stable back-up for unstable renewable energy like sun and wind.

Unfortunately, these aspects seem to be neglected in Europe today. 

The use of gas has stagnated at the expense of increased coal-fired generation, stimulated by extremely low carbon prices. As a result, CO2-emissions have increased in different countries.

For Norway – as a major exporter of gas to Europe – EU energy policy is vital. Climate and energy policy are important for gas demand, and for the role of gas in the energy mix.

This is one of the reasons why the 2030 framework for climate and energy policies currently being discussed are of particular interest to us. Norway welcomes the proposal by the European Commission for ambitious greenhouse gas emission reductions.

We also see a need to improve the European Emission Trading Scheme, the ETS. If we are serious about cutting emissions, this should be the most important instrument to do so.

Renewables

I don’t believe there is one single winning strategy to reconcile climate change mitigation with economically competitive energy systems. There are several pathways towards a low-emission economy.

I have mentioned a global price on emissions, reducing the use of coal in favour of natural gas, and to improve the ETS. These are all important tools.

The role of renewable energy will grow and we should actively promote it. More use of renewables will lower emissions, and put us in a better position to fight climate change.

In a world where there will be constraints on emissions, easy access to clean renewable energy is a competitive advantage.

Furthermore, we need more renewable energy as electricity is being used in new ways and in new areas. This is certainly the case with the introduction of electric cars. We will hear more about that from mr. Elon Musk later on.

Norway has traditionally benefitted from abundant hydropower resources. We will also continue to increase the production of renewable energy.

As a supplement to renewable energy, carbon capture and storage is a critical part of the world’s low-carbon energy portfolio. This realisation has to be matched by action both from industry and policy-makers.

Conclusion
Your Majesty, ladies and gentlemen,

The energy industry has extensive experience adjusting to changes, and I am confident you will be able to meet future changes and challenges as well.

The way I see the future, the world needs more energy, it needs cleaner energy and it needs reliable energy supplies.

Norway will continue to be a reliable long-term provider of energy. Both oil and gas, and renewable energy.  

We need serious action on the climate challenge and we have to keep producing enough energy for a world that needs it.  

These challenges are closely connected. Reconciling them is the biggest issue facing both policy-makers and industry today – and for the foreseeable future.  It demands action from all parts involved – governments and industry alike.

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

Thank you for your attention.