Statoils Høstkonferanse 2013

Check against delivery

 

It is both an honour and a pleasure to be here for this year’s Autumn Conference and the presentation of the World Energy Outlook for 2013.

We are in a theatre called “Det Norske”, built as a symbol of Norwegian culture. While this place is very much Norwegian, what we are going to discuss here today is truly global.  

The Autumn Conference has become a tradition; a valuable meeting place for updates on, and discussions of, global energy trends.

The conference is generously hosted by Statoil, and jointly organised with the IEA and the Ministry of Petroleum and Energy.

I very much look forward to the presentation by Dr. Fatih Birol coming up in a few minutes.

But first, I will share with you some reflections on the energy issue globally, and Norway´s role in that picture.

 

We need energy!

 

First, the world needs energy. The earth´s growing population needs massive quantities of energy.

Today we are more than seven billion people on this planet. In 2035 there will be almost 9 billion. Access to energy is a precondition for economic development and thereby social welfare.  

I am a historian by education. I find the long lines particularly interesting. Let me use Norway as an example. A hundred years ago, while countries in continental Europe developed their industry based on coal, we developed our hydropower.  

An abundant, flexible and renewable source of energy gave the emerging industrial sector in newly independent Norway a real kick-start.

The rapid industrialization of modern Norway would surely have been much more complicated without these tremendous resources.For me, this clearly demonstrates the vital link between access to energy and economic development for a growing population.

This was true a century ago. But it is just as true today.

The IEA has calculated that by 2035 global demand for energy will rise by a third.Most of this growth in demand will come from non-OECD countries, and particularly from Asia, just as we have seen over the last decade.

Why? Because these emerging economies are experiencing rapid economic growth. And their population is also growing. In Africa, the picture is more mixed. Half the 1.3 billion people in the world who lack access to electricity live there.  

However, over the last years many African countries have seen economic growth. Hopefully this is a trend that will continue.  

If they are to achieve the same levels of growth as the emerging economies of Asia – stable and secure access to energy will be crucial.

Sustainable Energy

In the end of September the Intergovernmental Panel on Climate Change released the first part of their fifth assessment report, confirming the scientific evidence that human induced climate change is happening. 

The world needs to handle both the climate challenge, and the justified demands for economic development, where access to energy is critical. These are challenges we have to address in parallel.

One of the positive news coming from the IEA report is the increased role for renewable energy. Renewable energy is expected to account for nearly half the increase in global power generation to 2035.

That is good news as more use of renewables will lower emissions, and put us in a better position to fight climate change.I already spoke about how Norway has traditions when it comes to renewable energy. We also have strong ambitions.

And we are on the right track. Today, we have, together with Iceland, the largest share of renewable energy production in Europe. Nearly all our electricity production comes from renewable energy sources.

And we will do even better. By 2020 renewables will make up 67.5 percent of the Norwegian energy mix. That is the highest figure in Europe.

The new Government wants to continue this push by doing what we can to increase efforts to enhance the production of renewable energy. That is a goal clearly stated in our policy declaration.

This is good for the climate, good for Norway and good for energy-intensive industry. In a world where there will be constraints on emissions, easy access to clean renewable energy will be a competitive advantage.  

Energy- and climate policy is a “hot topic” these days. Last week, stakeholders, negotiators and ministers from all around the world met in Warsaw.

There is important work to be done in the running up to the UN Climate Conference in Paris in 2015.

In order to limit the global temperature change, increased deployment of new and innovative energy technologies will be necessary.  

In this context, making carbon capture & storage commercially available will be crucial. Hence, it is telling that my first trip abroad as the new minister of petroleum and energy was to the US, with CCS on top of the agenda.

I participated at the Carbon Sequestration Leadership Forum in Washington - an important arena where the main actors meet in order to move the CCS technology forward.

Norway is in the forefront of this. About twenty years ago Statoil deployed large scale CCS at the Sleipner field in the North Sea, and they have also utilized the same technology at Snøhvit in the Barents Sea.

Our Technology Center at Mongstad is world class and a place where new technologies are being tested and developed.

International collaboration and concerted action is absolutely essential if we are to succeed with our ambitious targets to avoid severe climate change. Therefore, the US Secretary of Energy, Dr. Moniz, and I have agreed to enhance the cooperation between our test facilities for CCS.  

Furthermore, I had the pleasure last week to participate at the IEA – Ministerial in Paris. In Paris we discussed the key energy challenges of the day. Amongst other, we debated:

Competitiveness of countries – and energy’s role

Oil and gas market developments and prices

Climate change policies.

The World Energy Outlook, which will be presented here today, gave good background for our discussions. We also established a foundation for a closer cooperation between IEA and important non-member countries – Brazil, China, India, Indonesia, Russia and South Africa.

A worrisome trend – more use of coal

The global energy mix has not changed significantly over the last ten years. The energy system is huge and complex. Therefore it takes time to change it. While we expect an increased role for renewables, fossil fuels still cover more than 80 percent of world energy demand.

The use of coal is on the rise, even in several European countries.

Coal has accounted for nearly half the increase in global energy use over the past decade. Global coal demand is also expected to increase by 17 percent to 2035. China now uses more coal than the rest of the world combined, and about 75 percent of India’s electricity comes from coal.  

The problem with coal is the high carbon content, and without CCS it is far from sustainable in a climate perspective. The continuing rise of coal on a global level is a worrisome trend. Using more natural gas instead of coal would reduce greenhouse gas emissions significantly.

More use of natural gas

While we should strive to increase the role of renewables and improve energy efficiency, we should also acknowledge the important differences between various sources of fossil energy. This is especially important because we know that fossil fuels will be the backbone of world energy supply for decades to come.

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 gas fired ones, will deliver even bigger reductions.

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

Natural gas plays an important role in all of IEAs scenarios and is an affordable and available source of energy.

Globally, the market for natural gas is diverse and with abundant supplies, not least because of the shale gas revolution going on in the US. Norway can also contribute as our natural gas production will remain high for years to come.

So far 31 per cent of our gas resources have been produced. Large parts of the Shelf have not yet been explored for oil and gas, and as we have seen in recent years, substantial discoveries can still be made.

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

Pollution at a cost and better working energy markets

In order to tackle the challenges facing the world, we need to apply the best tools available. The energy markets are among the markets that could work more efficiently than they do today.

Let me mention two aspects where improvements in the energy markets really would change behavior to the better.

Firstly, we need a global carbon price. Pollution should come with a cost. Our Norwegian experience clearly demonstrates that pricing emissions also leads to lower emissions.  That would be the best instrument, but unfortunately the world seems a long way from going in this direction.

In Europe we should reform the Emission Trading Scheme (ETS) to enable it to work as the main instrument in climate policy after 2020.

Secondly, we must avoid distorting the markets with inefficient subsidies, taxes and other policies.

Let me use an example. Europe is investing heavily in renewable energy these days. A lot of wind and solar energy is now coming into the system. However, this is variable energy generation and for cloudy days with little wind, back-up is needed.

The paradox is that today this back-up is mostly coal. This implies that many European countries risk subsidizing the most heavily polluting fossil fuel through so-called capacity mechanisms.

Conclusion

It is time to summarize. Unfortunately, there is no single easy fix when addressing the twin challenge of energy and climate. The task gets more demanding for each passing year.

The way I see the future, the world needs more energy, it needs cleaner energy and it needs reliable energy supplies. These challenges are closely connected.

Natural gas meets all these criteria and is also a key measure to mitigate climate change in countries relying on coal.

Polluting should come with a cost. A global price on CO2 would be a great step in the right direction.

It would make the biggest polluter – coal – less attractive. It will also help to strengthen our energy efficiency efforts and provide important incentives to renewable energy and CCS.

Norway will continue to be a stable and reliable provider of energy for Europe – now and in the future.

Finally, I would like to commend Dr. Birol for the excellent analyzes in the World Energy Outlook, and the important input this report gives to policy makers.

I wish you all an interesting and rewarding conference.

Thank you for your attention!