Technology and environment

Excellencies, ladies and gentlemen!

It is a great honor for me to be here at the OPEC International Seminar and address such distinguished audience.
Times are interesting – and challenging.  Look only to today’s Financial Times. The front page shows demonstrations against AIG in the US, warnings against class war in France and the UK decision to tighten the supervision and regulation of the financial sector.  All of this would have been hard to imagine only a year ago.

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The economic downturn has led to a substantial decline in oil and energy prices. This will cut into companies’ budgets and also make it less attractive to invest in new energy technologies. We must not let the financial crisis overshadow the climate crisis. The financial crisis and the recession in the world economy will pass. The damage we inflict on the environment will remain for generations.  Governments and the industry have a shared responsibility to keep up R&D activities.

Technology matters – and will assist us in meeting both new and more established challenges.
Look to the petroleum industry – and I will share with you some issues on the agenda in Norway, issues with – in my view – international relevance.  The petroleum industry is and will be met with a set of expectations – expectations I consider justified.

The petroleum industry is expected to continue to supply increased oil recovery. Technology will contribute in this regard. 

The petroleum industry is expected to continue to provide adequate and sophisticated oil spill preparedness – both in terms of organization and equipment.  Technology will contribute in this regard.

The petroleum industry is expected to continue to further curb emissions to sea and land - discharges have gone down but the good work must be kept up. Technology will contribute in this regard.

The petroleum industry will be expected to form part of a partnership with governments and civil society to combat climate change and reduce emissions of CO 2.  Technology will contribute in this regard.

The world is facing a most difficult time economically in decades. There is a real risk that the resources we divert to R&D and development of new technologies will be less because of the financial crisis.

Whether one talks about Carbon Capture and Sequestration, energy efficiency,  new technologies for bio fuel production, solar power or many other renewable energy technologies, lower prices on oil and fossil energy will make commercialization more difficult. Improved oil recovery is an essential component in Norwegian resource management.

The giant Ekofisk field is a good example on what has been achieved on this front. In 1969, Ekofisk - Norway's first oil field was discovered, and came on stream two years later. At the time one assumed that it was possible to produce only 17-18 percent of the total amount of oil in the reservoir.

Early in the 80ies, it was experimented with new technologies to increase the recovery rate on Ekofisk. At the time, water injection in chalk reservoirs had never been tested anywhere in the world.

The results of the experiments were promising, and in 1987 water injection was initiated at Ekofisk, first on a small portion of the reservoir and later expanded to include ever larger portions of the reservoir.

Water injection on Ekofisk field has been a tremendous success. The operator ConocoPhillips estimates that the recovery rate has increased about 11-12 percent as a result of water injection. The recovery from the field is through the thirty years increased from 17-18 percent to the current estimate which is 50-52 per cent. This represents enormous value for both owners of the field and for the Norwegian society.

However, Ekofisk is not an exception. Recovery rates on NCS in general have increased significantly over time and are among the highest in the world. Extensive development and implementation of new technology will be necessary to improve recovery rates further.

The challenge we face today is to develop and deploy technologies that could help us achieve similar step-changes in recovery factors that water injection has delivered. 

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Environmental standards on NCS are comparatively high. The oil and gas industry has for close to 20 years been subject to a significant CO2 tax, and there are strict regulations for flaring and handling of gas. From 2008 the petroleum sector was included in the European quota system as well.

As a consequence, emissions to air per produced unit are low.

Efforts to reduce discharges to sea have been a top priority for years. The Norwegian parliament established ten years ago a goal of zero discharge of oil and hazardous substances into the sea from the petroleum industry.
This is very ambitious.

The amount of produced water from the wells is increasing, as the fields mature. This represents an environmental challenge to us. Produced water contains small amounts of naturally occurring substances and radioactive substances that have leaked out from the rock.

The petroleum industry in Norway has lately achieved substantial improvements in this area. The emissions of added environmentally hazardous chemicals from the Norwegian shelf have been reduced by 99 percent over the past ten years. Efforts continue to actively seek to replace the remaining hazardous substances.

It is so far not found direct effects of these emissions on vulnerable resources. However, further research will evaluate the possible long-term effects.

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The Norwegian government allocates considerable resources – both financial and political – to the issue of Carbon Capture and Storage (CCS).  CCS technology is a key component in combating GHG emissions.  Everyone – including the fossil energy producers have an obvious interest to achieve this objective.

CCS offers the potential to reduce CO2 emissions by 85 to 95 per cent from coal and gas fired power plants. This technology also offers a large potential for reduction in emissions from industrial processes.

According to the IPCC carbon capture and storage is a key technology in the mitigation of climate change. This conclusion is supported by the International Energy Agency which stresses that carbon capture and storage is a necessary technology in reaching the goal of limiting the global temperature increase to a maximum of 2 degrees compared to pre-industrial level.

What are the main challenges for large scale commercial deployment of CCS?

Financial incentives are essential to stimulate early development, deployment and dissemination of CCS technology, and thus contribute to a much needed reduction in global CO2 emissions. The capture costs must be brought down. There must be financial incentives for private investments in CCS projects. Considering the novelty of the technology, the high cost of CCS, and the need to develop a well-functioning market for CCS technology, there is a strong need for initial financing.

Safety and liability issues in relation to storage of CO2 are another challenge. Common international and national regulations and guidelines for environmentally sound geological storage of CO2 are vital.  Proper legal frameworks and regulations would help gain public acceptance for CCS.

The Norwegian petroleum industry has extensive experience in storing CO2 in geological structures. Since 1996, one million tons of CO2 per year have been separated from the gas production on the Sleipner field in the North Sea and stored in a geological formation 1,000 meters below the seabed. Multinational research projects have collected relevant data in the formation, which confirms that the CO2 is confined securely within the storage reservoir.

The Norwegian government is strongly committed to further develop and contribute to a widespread dissemination of this technology. We have two ongoing facilities which capture CO2 from the well stream at gas fields; in addition to Sleipner, we have the Snowhite field. We are also working on a test centre for carbon capture from flue gas at the refinery at Mongstad. In a second phase we will put in place full scale CCS at gas fired power plant.

High costs are a significant hurdle for the CCS technology that must be overcome before this technology makes a difference in our fight against climate change.

High costs are also a challenge for another technology that could help us combat climate change as well; offshore wind energy.

There is a large scope for technology spill over from petroleum production to offshore wind energy. It is an example on how existing technology can be utilized several times and to serve different purposes.

The energy potential for offshore wind developments in the world is huge. On the Norwegian Continental Shelf alone a theoretical potential of 100 times the current mainland electricity production has been estimated. This number shows that establishing offshore wind outside the Norwegian coastline is not a matter of wind resources.

Offshore wind power plants in shallow waters are in place in numerous locations in the world and the potential for expanded production is vast, although technological challenges exists, with corrosion, salt sea water, etc.

But technologies are being developed that will make is possible to build wind power plants on deeper waters – both fixed wind turbines and floating wind turbines that allows development of offshore wind power on much deeper waters.

Moving out to deeper waters, new offshore wind technology needs to be developed for improved reliability and reduced cost. The whole offshore wind park development chain can be improved – from design, manufacturing and installation of wind turbines, grid connection and system integration, to operation maintenance and decommissioning.

Petroleum technologies which are relevant in this respect includes development of steel and concrete substructures, jackets, anchoring systems for platforms and turbines, marine operations and installation of structures, and cable technology.

It is worth mentioning that StatoilHydro – the Norwegian national energy company – has decided to build the world’s first full scale offshore floating wind turbine.
 
It will be a 2,3 MW floating prototype turbine, situated 10 km off the coast of Norway, with a cable to shore, and with planned start-up this autumn. The company is investing app. 50 mill. Euro in the prototype, including a 7,4 mill. financial support from the government.

The purpose of the pilot project is to find ways to reduce costs so that floating wind power in the long run can compete in the power marked. Thus, the project is an illustration on how offshore petroleum technologies can be used also for renewable energy purposes.

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Earlier this month the US Secretary of state, Hillary Clinton, said that one should “never waste a good crisis”. This is particular true when it comes to R&D. We know there is a role for governments in promoting R&D. It is also true that energy related R&D has dropped in OECD countries, both as a fraction of GDP and as a fraction of overall R&D. Given climate change and the technical challenges the oil and gas industry faces, this trend should be reversed. Government stimuli packages provide a golden opportunity. Don’t let us waste a good crisis.