Oslo Energy Forum 2017

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Edited Friday at 17.00.

Introduction

Ministers, dear friends of the energy industry, it is a great pleasure to meet you all here in Oslo for important and fruitful discussions on the future of our industry.

2016 was an eventful year. The Paris Agreement entered into force. The UK decided to leave the EU. The oil price started to recover.

Today, I would like to give you my account of the Norwegian Continental Shelf and the global backdrop of our discussions here in Oslo.

The NCS

The petroleum industry is, and will remain a cornerstone in Norway's economy for many decades ahead.

I am a true optimist on behalf of the Norwegian Continental Shelf. I believe in its possibilities and attractiveness. We have;

a strong resource base

large unexplored areas

many exciting development projects

a stable and predictable framework

a supply industry in the technological forefront.

There are huge opportunities for companies that show ability and interest in further developing the NCS.

Norway is a member of the OECD, situated in a stable part of the world. I would like to underline that Norway maintains its trademark: a stable and predictable framework.

One of the first things I did when I took office was to award licenses in our annual licensing round.

Awarding a high volume of prospective exploration acreage to the industry is a key element in our petroleum policy. The recent licensing round - APA 2016 - resulted in 56 awards.

The number of awarded licenses has been high and stable the past five years. In this period, we have seen moderate oil prices, consolidation in the industry and cost efficiency programs, both among operators and suppliers.  

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

We will continue to offer acreage to companies that see significant, long-term business opportunities on the Norwegian Shelf, both in mature and frontier areas.

Large areas are unexplored, and the resource potential is good. The Norwegian Petroleum Directorate estimates that 18 billion barrels of oil equivalents are yet to be found.

The frontier areas on the shelf are the deep-sea areas in the Norwegian Sea and a large part of the Barents Sea.

In that regard, we will put forward a proposal of acreage in the 24th licensing round on public consultation. I expect announcement on this round before the summer.

We also see encouraging results from the industry's efforts to increase efficiency and bring down costs, and to invest in new oil and gas capacity. We need to continue on that path.

Last year, my Ministry received five Plans for Development and Operation of new fields.

We know that several large, exciting projects are under way. By the end of this year, I expect to receive the development plan for the Johan Castberg field in the Barents Sea.

This is the largest oil discovery yet to pass investment decision on the NCS. Expected recoverable resources are more than 500 million barrels of oil.

I hope and expect to see several new, large field developments in the Barents Sea. Development plans for a number of substantial discoveries are being prepared.

Global context

Now, the activities on the NCS do not take place unaffected by what is going on in the world around us. I want to outline some key elements of this picture:

World leaders adopted the UN Sustainable Development Goals in September 2015.

The goals made it clearer than ever: we need to eradicate extreme poverty and hunger and reduce inequalities.

But we also need to take action on climate change. The Paris Agreement was a positive and significant step forward.

To solve the sustainable energy goal for a growing global population, we need to produce more energy with less greenhouse gas emissions. 

Low-emission fossil fuel technologies will be part of the solution to meet the sustainable development goals.

We need a broad, global strategy - including:

More efficient production and consumption of energy

Increased production of renewable energy

Shifting from coal to gas in power and heating

Implementation of new technologies, such as carbon capture and storage, CCS

We need a framework that triggers the most cost effective emission reductions. Put simply: We need to work with the market.

That is why I believe in putting a price on emissions. The price mechanism is superior to all other measures in order to achieve CO₂ emission reductions efficiently and at a low cost.

This instrument provides real incentives for the private sector to invest in reduced emissions.

In the early 1990s, Norway introduced a high tax on CO₂-emissions.  The petroleum sector has also been a part of the European Cap and Trade System, EU ETS, since 2008. I can confirm that it works!

It has contributed to new technological solutions. Energy efficiency is improving.

AND in two of our gas fields – Sleipner and Snøhvit - the tax on CO₂ emissions contributed to realize the only two industrial scale CCS projects in operation in Europe.

I support strengthening the EU ETS. It can play an important role as a technology neutral and cost effective driver for low-emission investment in Europe.

Norway is a large and predictable supplier of energy to Europe. Both renewable energy such as hydropower and oil and gas. We are also a part of the internal energy market through the EEA Agreement.

We need well-functioning energy markets. While the UK has decided to leave the EU, it is important that the "Brexit" process does not weaken these markets in Europe.

The UK will continue to be physically connected to the European electricity and gas grids. Close cooperation with the UK is crucial in order to clarify what effect Brexit could have on the trade of energy.

Gas is part of the solution – not the problem

Natural gas is already an important source of energy globally. I think its role in the energy mix will continue to grow into the future.

The IEA predicts that natural gas, together with renewables, will be the winners in the race to meet the growing energy demand the next decades.

Gas offers many environmental benefits over other sources of energy. Gas is the cleanest of the fossil fuels; it is a low carbon fuel. In addition, it is abundant and gas is inexpensive.

Natural gas supports two elements of a cleaner energy system: by displacing coal and by facilitating the integration of renewable energy.

Replacing coal with gas can also improve urban air quality. This is a severe and acute problem in many cities of the world.

In electricity generation gas emits 50 % less CO₂ than coal. It means that gas delivers twice as much electricity per unit of CO₂ emitted.

Replacing coal with gas is among the easiest and most cost effective ways to cut CO₂ emissions.

The UK can serve as a good example. What has been accomplished in the UK recently is impressive.

Last year coal-fired power generation in the UK fell by more than 50 %, to its lowest level since 1935. This switch from coal to gas cut CO₂ emissions from power generation by as much as 20%.

One reason behind the UK coal-to-gas switch is the price on CO₂. UK has put a price on CO₂ emissions that is 4 times as high as the ETS CO₂ price.

We still lack technologies to store large amounts of electricity. We need reliable and predictable sources of power production that do not change with the weather. Gas is therefore a good partner for intermittent renewable energy.

In addition, Norway has an abundance of storage hydropower. This is an excellent provider of balancing power. Both domestically and for our neighbours because of our interconnectors.

A lot of effort is put into developing even lower carbon solutions for natural gas.

Norway strongly supports carbon capture and storage as one important tool to mitigate climate change.

Today CCS is perhaps the only available climate mitigating measure in some of Europe's important industrial sectors, such as cement and steel.

The energy industry and governments have a shared responsibility to develop CCS to a commercial scale.

Conclusion

Dear friends. The global energy realities require us to produce more energy for a growing global population. At the same time, we must reduce emissions.

I am positive that the innovative and bold petroleum industry has what it takes to face this challenge.

Norway will do our share by supplying oil and gas, and keep in place environmental policies that triggers the most cost effective emission reduction from our upstream production.

The future for the Norwegian Shelf is bright. I am confident that oil and gas developments in Norway will continue to create high value for both the companies and the Norwegian society for decades to come.

Thank you for listening!