Speech at Offshore Northern Seas

Energy discussions take place all over the world, at various levels, and related to all kinds of energy sources. There is a long way from the board-rooms of the oil companies to the villages of Africa that depend on scarce fuel-wood. There is an equally long way from the nuclear power plants of Russia to the wind-mills of Northern Germany or the natural hot water heating of Iceland.

There is a world food organization, a trade organization and a health organization. But there isn't any global energy organization. And there isn't even a reminiscence of a global energy policy.

There are conferences like the present. There are negotiations on climate change. And there are international rules governing parts of energy-related activities, for example in the European Economic Area. And even here the rules are applied only to some parts of the European energy market.

Norway has been rich in energy in the 20th century. We have been endowed with rich natural resources, counting not only petroleum, but also reasonably stable seasonal rainfalls, and a geography of natural basins for storage of water.

We are used to having reasonably abundant hydro generated electricity. Not so any more. While our energy consumption is stable, electricity use is increasing. We are dependent on trading and exchanging electricity with our neighbouring Nordic countries. The light in this room may be generated by a Danish coal-fired power plant or by a Swedish nuclear reactor, as we have liberalized the Nordic electricity market. We don't actually know.

Growing electricity needs in the Nordic region have fueled plans for gas power plants here in Norway. And that discussion takes place towards a background where we are struggling to meet a national CO2 emission target.

And since much of our emissions come from off-shore production and transportation of oil and gas, the national debate on climate policy also includes the rate at which we deplete our petroleum resources. There are those who would like us to scale down the depletion rate and save more of these resources for coming generations.

This is the environment in which the energy industry operates here in Norway. In the following I will speak about the Nordic energy situation, about our views on the climate change negotiations and about our depletion rate.

First: To the Nordic situation. There is now a common electricity-grid in the Nordic region. Historically, Norway used to be a major exporter of hydro-power. This year, when we have had very little rain and snow, the reservoirs are lower than they have been for 60 years. The reserves are 20 per cent lower than the lowest level measured in 25 years. The shortage equals the annual consumption in the larger Oslo area.

Hydro-power is clean, but unpredictable. The fluctuation in annual production in Norway may equal the total annual consumption of the whole of Denmark. In the present situation we are forced to save energy and import energy. We must use whichever capacity there is in the Nordic region. In the medium term, we must improve the efficiency of the grid in Norway and expand it. We are laying cables in order to exchange energy also with Germany and the Netherlands, and we must look for alternative forms of energy.

Looking ahead, we will aim at covering our electricity needs by means of renewable resources, a challenge, since electricity needs in the Nordic region have been growing by some 1.5 per cent annually. If we project that trend into the future, the annual growth will correspond to the capacity of the two gas power plants currently being planned here in Norway.

Thus, there is a common Nordic capacity problem, even if we succeed in saving energy and even if we harness more alternative forms of energy. It is difficult to see how we can meet these needs in the Nordic region without harnessing more of the Norwegian natural gas, which is the purest form of energy, third only to hydro and bio.

Secondly, I turn to the climate negotiations.

Some critics argue that Norway is a serious part of the problem since we produce oil and gas.

And the hard core of our critics even argue that we stand on a weak footing - morally speaking - exactly because we produce oil and gas.

The threat of climate change has been known to the world for ten years. And still we have not yet worked out legally binding commitments, procedures, timetables and targets that work.

Presently the world is discussing a partial solution whereby most developed countries would agree to making equal percentage reductions in their emissions.

Now, is that a good and effective solution?

Part of the background is that the effect of measures, even harsh measures, taken in only some countries would be nullified if other countries pursued laissez-faire-policies. That is the intrinsic global nature of the climate threat.

Part of the background is also that some countries, like Norway, have already taken harsh measures. We were the first to introduce CO2 taxes on the use of fossil fuel. Many other oil producing countries could not believe this. In their view, we were undermining our own income base as a nation. They thought we were out of our minds, and they said so, loudly.

My point is that if we agree now, on equal percentage reductions, those of us who have done a lot will be penalized, while those who have done little so far will look real good.

The Climate Convention of 1992 gave us important principles for future solutions.

• They must be cost-effective.
• Activities could be implemented jointly between countries. - And, we needed to address all greenhouse gases, recognizing that there are many gases that contribute to the problem and that we could achieve goals by a mix of measures.

This is the basis we must work on. Not equal percentage reductions. That can lead to bizarre results.

Let me give you an example: By far the largest pr. capita emission comes from the US. The average American emits today more that twice the CO2 of the average Norwegian.

If the US and Norway each cut emissions by 20 per cent, the average American would still emit twice the CO2 of the average Norwegian. There is every reason to welcome an American willingness to discuss such reductions at all. But the issue needs to be put in the right perspective.

Germany is another country that has seemingly done well in reducing its emissions. The closing down of pollutive, outdated industries in the former GDR leads to a sharp decline in total emissions. The situation in the West of Germany is, on the other hand, virtually unchanged.

There are other such examples. The Netherlands keep the emissions at Schiphol out of the national account, since air travel is "international".

Yes, statistics are deceiving. Mark Twain coined the triad of white lies, black lies and statistics. And even President Eisenhower seemed to be concerned when told that half of all Americans where less than average intelligent.

Norwegians live in a cold climate. In winter, many people have the opposite of midnight sun. We live scattered and far apart, and most of us live in one-family houses. On a surface the size of Germany, stretched almost like Chile, mountainous, indented by fjords and cut by valleys, we have a road and railway-system serving fewer people than surround the railway-station of Osaka, Japan. We depend on energy for light, heat and fuel.

And still, even when counting the emissions from our large off-shore industry, our emissions pr. capita is 8,2 tonns per year, which is lower than the EU average.

The discussion of national targets and equal percentage reductions takes some of the pressure off those countries which can achieve their goals by means of no regret measures, such as closing down industries whose time has gone anyway. Countries that have already modernized their industries, have nothing easy to close. Norway is in such a situation.

An agreement based on equal percentage reductions among developed countries would require us to take measures that other countries would not dream of, such as restricting the use of cars, or closing down competitive and comparably clean industries. What we ask is that an effective and binding agreement would allow us to make a serious contribution without doing unilateral severe damage to our society and to our welfare state.

That is why an equitable burdensharing is so essential. It has been widely overlooked that the mandate for negotiations, adopted by the parties to the climate convention, reflect this need. The manadate clearly spells out that one must take into account the differences in starting point also between developed countries. The economic structures and the resource base as well as other country-wise individual circumstances are are also clearly recognized in the mandate as basis for the negotiations of equitable solutions. If we follow this mandate, if we observe these important criteria, then a policy based on equitable burdensharing will enable us to achieve more and to realize more ambitious goals.

We continue to believe that fiscal measures like CO2-taxes is one good option. But important countries have rejected such means, and continue to do the exact opposite, to subsidize the use of coal. If, in this situation, we should increase our high CO2-taxes even further, it would amount to imposing a unilateral export-tax on our industries to the benefit of its competitors abroad, which operate under more lenient environmental rules. The impact on the atmosphere would be negative.

When we extract natural gas, the production and transport produces emissions. But the gas moves in pipes to Europe where it reduces the need for oil and coal that pollutes much more. Today, as I told you, we import electricity produced from coal, in Denmark. That increases the Danish emissions, while benefiting Norway. This is a clear illustration of how approaching a global problem with the prime ambition of reaching a national target will lead to irrational results.

The problem is that we are all watching each other. Norway has played an active role in the climate negotiations and will continue to do so. We have taken on a significant national burden. Industry has protested severely when measures where imposed, not least when we decided to tax emissions from off-shore petroleum production. But it produced results - remarkable results. Our off-shore production is the cleanest in the world. Industry found new solutions. Emissions where cut deeply.

This chart shows how effective the Norwegian oil and gas production really is when we look at the discharge of climate gases per standard cubic meter oil equivalents. Our emissions from the off-shore sector amounts to 22 per cent of the national total. Should they be reduced for environmental reasons?

If exports of gas from Norway were reduced, isn't it more than likely that Russia, or some other country, would substitute for our exports? That would increase the global emissions of greenhouse gases by a factor of 8 or 9.

In the UK and the US, the discharge of climate gases per entity of oil produced is approximately three to twelve times respectively that of the Norwegian emissions.

And any other possible source of replacement would lead to increased emissions. This shows the significance of Norway producing and exporting oil and gas from an environmental point of view.

I revert to the climate convention and this autumns negotiations. Equity requires that we in the developed world take the lions share of new commitments while the developing countries are allowed to increase their emissions in their struggle to break out of poverty. We are also best suited to develop new solutions, to give people the same services with less emissions. We still possess the technology edge.

We believe that by diverting attention away from quantity and percentages, and focus on types and costs of measures, we would get a much clearer picture. Who are the free riders and who are doing their fair share?

An effective climate protocol requires a combined political and scientific craftsmanship which we have yet to see in this world. Unless a binding agreement is both cost-effective, equitable and verifiable, and unless it recognizes that also within the West, states have reached different levels of development, it will not work.

Now thirdly and finally, to our depletion rate.

There is every reason to congratulate the off-shore industry which is active in Norway with their achievement. The present depletion rate is the result of decisions taken long ago. We thought ten years ago that today's activity would yield about one million barrels a day. But due to technological advances, due to increased competence and knowledge about reservoirs, drilling and production techniques, we are able to produce more from the various oil and gas field.

Resources previously deemed irrecoverable is now being extracted. There is every reason to welcome this.

Our continental shelf was opened in a step-wise manner. By initially choosing a slow pace of exploration, we gathered geological knowledge with time. We chose to refrain from regulating production by other, stricter means, such as postponing development of new fields. That could have led to less than optimal exploitation of resources and increased costs for the companies as well as for the State. In turn, it might have led to reduced interest in engaging in new investment on the Norwegian Continental Shelf.

We believe our policy is the best one, for Norway, and for the industry. And all the more so because the oil prices of the future are uncertain.

Postponement of production by ten years requires a doubling of oil prices to become profitable. It is thus precisely in the interest of future generations that we place today's oil revenues in a separate fund.

Norway will continue to be a large, stable and secure energy exporter. Norway will remain attractive for the international petroleum industry. We will retain an attractive investment climate and a balance between state control and business opportunities. Our aim is to ensure the continuous transformation of our natural resources into the greatest value possible. In this manner we can give coming generations the best obtainable point of departure, using the revenues wisely, and continue to strive for environmental excellence.