Høstkonferansen 2017

Check against delivery.

Excellences, energy friends, good morning! Welcome to this year's edition of the Autumn Conference. This conference has become an important arena to discuss the big issues facing the energy markets and our common energy future. This year is no exception.

As per tradition, we will have a thorough presentation of the latest World Energy Outlook by the IEA Executive Director, Dr. Fatih Birol, later on. The IEA is the by far the most authoritative global energy agency. Its deep and broad knowledge about world energy and its analytical capacity combined with high data quality, makes it unique.

The annual Outlook is proof of this. It provides analyses and insight that are essential for anyone who wants to understand the developments of the energy markets. I look forward to hearing your thoughts, Dr. Birol.

This year's Outlook highlights that the world is changing. The rapid deployment and falling costs of renewable energy technologies is good news.  Electricity is the rising force among worldwide end-uses of energy - with more and more countries planning for an increasing share of electric vehicles on the roads.

Norway has been following this path for a number of years. Norway has a particular advantage in this regard, as almost all of our electricity demand on the mainland is covered by renewable hydropower.

Furthermore, we are heavily engaged in developing the Nordic and the European electricity market, and we have strong and successful incentive schemes that promote sales of electrical and hybrid vehicles. I believe we are well prepared for an electrifying future.

At the same time, I acknowledge that few countries share our starting point.  The world will continue to demand oil and gas going forward.

The world population is growing. We live in a world that needs economic development and growth to improve the lives of millions people around the world. The demand for energy will therefore grow.

Producing that energy is a huge task in itself, but following the Paris Agreement we also have to ask ourselves: how do we produce the energy the world demands, with as low greenhouse gas emission as possible?

There is no easy answer to that question. However, I feel confident in saying that we need resources that can be developed efficiently and profitably, in a secure manner with light environmental impact and low emissions. Such resources will certainly have an edge in the global competition.

Hence, I believe Norway, with our vast energy resources, is in a very good position.

Norwegian actors, including today's co-host Statoil, will have a lot to contribute even beyond our borders. The recent opening of the Hywind and Dudgeon wind farms in the UK is clear evidence of this.

With the international discussion today, I will focus on oil and gas mainly.

Since petroleum exploration started on the Norwegian shelf more than fifty years ago, oil and gas has become Norway's largest and most important industry.

It is our most important source of income to the state and provides jobs and prosperity across the country.

We have reason to be proud of what has been achieved so far, and to be optimistic about what can be achieved in the future.

Through decades of activity, the Norwegian petroleum industry has proven its competitiveness. 

The slump that the global petroleum industry has experienced in recent years, is no exception. The actors on the Norwegian shelf and in the service and supply industry have shown an admirable ability to adapt to changing conditions.

Our shelf provides plenty of examples of this, such as the development of the huge Johan Sverdrup field. The breakeven price for Phase 1 is now estimated to be less than 20 dollars per barrel.

Looking further north, the Johan Castberg field is now estimated to have a breakeven of less than 35 dollars per barrel, about half of the breakeven estimated just a few years back. This is quite impressive!

I had the pleasure of seeing how new solutions are adopted a few weeks ago, during the official opening of the control room of the Valemon platform – onshore! Valemon is the first entirely remote controlled platform on the Norwegian Shelf.

I think we have only seen the beginning of this development. Thus, it is very appropriate that we will have a more in-depth look at the impact of digitalisation in the energy sector later in today's programme.

There are other reasons for optimism, even if I should underline that it is by no means smooth sailing for everyone from here. In particular, segments of the service and supply industry are still experiencing rough seas.

However, the signs are positive.

I expect to receive a total of 10 Plans for Development and Operation this year, including seven more projects before the turn of the year.

Every Norwegian should relish this development. It creates jobs  all across the nation.

A long-term and capital-intensive business like the petroleum industry requires predictable and stable framework conditions. This is a hallmark of the Norwegian petroleum policy.

The Norwegian system is market based. That means that within the framework established by the authorities, it is up to the companies to make the commercial decisions. This separation of tasks has served us well, and we would be wise to hold on to it. 

There is currently an ongoing debate on risk assessments. The management of many forms of risk is an integrated part of the commercial decisions made by the companies.

These decisions are in turn assessed by the financial market on a running basis.

There is no reason to believe that the market is not capable of taking into account the full scope of risks relevant to any given sector. That includes any potential risk and reward related to a more ambitious policy to fight climate change.

As good and dedicated as Norwegian civil servants are, I do not think they – or me - are better at making these kinds of decisions than the companies themselves. Nor, for that matter, are Members of Parliament, environmental activists or commentators in the press.

In short, the companies, not the authorities, are best placed to assess the profitability of oil and gas projects.

Let me use this opportunity to comment on the ongoing debate about the profitability of the Goliat field. The profitability of the Goliat field is interesting in itself, but it is totally irrelevant to decide whether oil and gas activity in the Barents Sea in general is profitable or not.

Like elsewhere on the shelf you will always have to calculate for each discovery, each field, separately, whether a development is profitable or not.

The calculation has to be based on the recoverable oil and gas volumes in the field, development and operational costs, and of course, the estimated oil and/or gas price over the field's lifetime.

That is why we always do these analyses when we are about to make a decision, for example an investment decision, or when the Government is about to decide whether to approve or not approve a Plan for Development and Operation for a specific field.

The Government does not do profitability analyses on a regular basis during a field's lifetime. But to enlighten the debate on Goliat, we are now doing a broader profitability analysis of the project. The results will of course be presented for the Parliament as soon as they are ready.

The role of the state is to provide the right incentives and support. In the petroleum sector, the Government encourages technology development for more efficient, competitive and environmentally safe operations through the DEMO 2000 and Petromaks programmes.

However, the primary way for the authorities to provide incentives is by making prospective exploration acreage available to the industry.

We have kept our word, and the industry has responded in kind. A record number of applications were submitted for this year's Awards in Predefined Areas. The Ministry aims to award the licenses early next year.

We have seen a high and stable number of awarded licenses over the last five years, even in an environment of moderate oil prices, consolidation in the industry and cost efficiency programmes.

The high number of awarded licenses illustrates that the Norwegian shelf is attractive and competitive.

Later this week, we will reach the deadline for applications for the 24th licensing round.

The licensing rounds are opportunities for new players with available capital to enter into the Norwegian petroleum sector. We welcome all actors with the ability and capacity to develop our shelf further.

Through our licensing policy, the Government provides the foundations for a continued active exploration and extraction of oil and gas on our shelf, and as a result, a continued high level of value creation and income to the state.

The policy framework that I have just outlined has been a tremendous success. Since the start of petroleum activities on the NCS, it has created values worth more than 13 000 billion kroner, or about 1,4 thousand billion dollars. That is quite astonishing!

As we move forward, there is little reason to make significant changes to our framework. We have the foundations in place to continue to create growth and prosperity for the Norwegian society as a whole.

There are those who believe that continued oil and gas exploration cannot be profitable in a post-Paris world. I think that is misguided.

Environmental considerations, including the regulation of greenhouse gas emissions, are integral to the Norwegian petroleum policy, and have been so for a long time.

Norway introduced a carbon tax on offshore activities in 1991, and since 2008 we have also been a member of the European emissions trading system – the ETS.

Putting a price on emissions works: Norwegian petroleum activity has on average significantly lower emissions than the world average.

Furthermore, Norwegian gas also provides a fast and cheap way to reduce emissions when replacing coal in Europe. The most prominent example is the UK, where coal-fired power generation fell by nearly 60 percent last year.

This coal was completely replaced by natural gas, and as a result, UK CO2 emissions from power generation fell by 24 percent, or 25 million tons in one single year. This is about half of the total annual emissions in Norway.

In 2016, Norway delivered almost 40 percent of the gas used in the UK. This year will not be any different. In other words, we make the UK transition away from coal possible!

As for the environmental impact, petroleum activity in the High North is subject to the exact same requirements as activity elsewhere on the Norwegian shelf.

With respect to the global climate, it makes no difference whatsoever where the production takes place. Conditions in the Barents Sea are not significantly different from those elsewhere on our shelf. Safe and profitable development of the resources there is entirely possible.

The Snøhvit field in the Barents Sea has been in production for 10 years. I want to underline once again, that it is up to the companies to make the commercial decisions concerning exploration, development and operation, also in the Barents Sea.

It is time for me to conclude. Let me make it very clear: This Government wants to maintain a high level of activity in our petroleum industry.

I believe we have the foundations in place for a safe and profitable development of the vast resources that remain on our shelf. We have every opportunity to exploit our resources in a way that benefits the whole of society.

Even as we live up to the strictest environmental standards in the world.

Even as the world strives to reduce emissions.

Even as renewable energy is growing fast.

Even as energy markets are changing rapidly.

Norway is well prepared for managing these developments, even as we have a large petroleum sector.

The positive signs that we have seen in recent months only reinforces my conviction.

Thank you for listening!