Presentation on seminar arranged by Wintershall and the German Council on Foreign Relations

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• Thank you for the opportunity to participate in this breakfast seminar. The title is indeed intriguing: The European formula: the search for a clean, secure and affordable energy supply. Norway and Germany will be two of the key players. I therefore find it timely to gather for an informal exchange of ideas in Oslo today.
  
  
• There is a close cooperation between the Norwegian and German governments in the energy field. We are now strengthening our cooperation. I have good cooperation with my German colleague, Vice Chancellor dr Philipp Rösler.
  
  
• The Norwegian-German energy partnership has developed through several decades. Germany now receives around 1/3 of its gas supply from Norway. Both countries are committed to developing carbon capture and storage technology. Another important issue is development of the North -European power grid, which will be important to security of supply both in Norway and the EU.
  
  
• Both Norway and Germany have lately taken important decisions for the development of their energy sectors. These choices have made it natural to intensify our cooperation by establishing two bilateral working groups. These working groups will look at trading balancing capacity and increased integration of the electricity market, as well as CCS.
  
  
• It is interesting to follow developments in German energy policy. Ambitions are high. Within 2050, most of Germany’s energy consumption will come from renewable sources. Greenhouse gas emissions will be reduced by at least 80% compared to 1990. Following the incident in Fukushima, Germany has also decided to close down its nuclear power plants by 2022. This could lead to a modernisation of the entire energy sector in Germany.
  
  
• There is a need for high investments if the targets are to be reached. And the investments must come now.
  
  
• I am personally very interested in your work on this, and look forward to follow these important – but also quite challenging – tasks you have ahead.
  
  
• Other countries also face the same challenges, but the question is: Are they able to reach the targets, and will the investments actually take place?
  
  
• On infrastructure, I follow closely the discussions within the EU as regards new infrastructure instruments. The current Trans-European Energy instruments are not a part of the EEA agreement
  
  
• Infrastructure developments are vital for future development of the natural gas and electricity markets and security of supply. New infrastructure will require significant commercial decisions. It is important that new instruments do not distort the market. Many EU ministers underlined this at the informal energy ministers meeting in Wroclaw, where I participated.
  
  
• Infrastructure is one key to facilitate the integration of more renewable energy into the system. Further integration of intermittent renewable energy in Europe towards 2050 poses a new set of longer term challenges to the energy system.
  
  
• I have noted that North Sea Countries Offshore Grid Initiative is among the priority projects. We have taken part in this since 2010. From the Norwegian side we have noted that the North Sea Offshore Grid Initiative could become a so-called Project of Common Interest (PCI). This is part of a long term vision to be followed.
  
  
• Meanwhile, there are other developments taking place almost as we speak. On Tuesday, Angela Merkel and Dmitry Medvedev inaugurated the Nord Stream pipeline from Russia to Western Europe. Needless to say, this was an important event to both sides.
  
  
• Natural gas production in Norway has grown more or less uninterrupted for 20 years and we currently produce end export more than 100 bcm annually. Norway is a long term, stable and secure supplier of natural gas to Europe, and will continue to be so.
  
  
• Over the next decade our gas production will most likely continue to increase. A production between 105 and 130 bcm per year in 2020 is our best estimate today. Still, gas is a finite resource. The production level in the future will depend on exploration activity and opening of new areas. However, Norwegian gas production and export will remain high. We will thus continue to be a secure supplier also in the longer term. More than 70 % of the gas resources remain to be produced.
  
  
• Successful exploration is crucial for long term production level. Exploration activity is maintained at a very high level on the Shelf today. And, we have recently decided to take additional steps to open up prospective areas in the north for oil and gas activities. We are eager to see new, large discoveries moving forward.
  
  
• Norway has a well developed gas transportation infrastructure. We assess the current export capacity to be adequate for future levels of export. Some investments in increased flexibility may, however, be undertaken. Also, the system operator Gassco is currently investigating possibilities for building pipelines to tie in new fields outside mid-Norway and the Barets Sea. In this context it is important with clear signals on the future European energy mix. These are large investments with a long lead time. There is not only a need for gas for the pipelines, but also a sustomer on the other side. 
  
  
• Norway has produced oil and gas for 40 years. We still consider the petroleum industry an industry for the future. This summer, the Government presented its White Paper on petroleum policy. The White Paper sets an ambitious target for future petroleum production on the Norwegian Continental Shelf for the years to come.
  
  
• The report, refers in its title to  “an industry for the future” An overriding and central message is a parallel focus on four main areas. We must increase production from existing fields. We must develop profitable discoveries that have not yet been developed. We must explore areas that are open to petroleum activities. Last, but not least, we must open new areas for petroleum activities.
  
  
• First, increased recovery from existing fields is a focal point.  Let me mention that when the plan for development and operation (PDO) for Ekofisk was presented, the recovery rate was estimated at 17%. Today, about 40 years later, the new PDO estimates a recovery rate of over 50%. The time of operation was initially estimated to be 40 years. It will be at least 80, and after 80 years of production half of the resources will remain.
  
  
• On the second point, development of profitable discoveries, Valemon is a good  example. Valemon was discovered in 1985, but the PDO was only just approved this year. New technology and efficient utilisation of existing infrastructure have made it possible to produce the resources in Valemon. Hild and Gudrun are other examples.
  
  
• Third: We will continue exploring the opened acreage on the shelf. We must focus on both frontier and mature acreage. There have been several promising new discoveries in recent years and the Avaldsnes/Aldous discovery is of course worth mentioning. This is the largest offshore oil find worldwide this year. Interestingly, this area was part of the first licencing round on the Norwegain Continental Shelf. It is also an area we thought that we knew very well.
  
  
• Last but not least: We work to open new acreage.  For areas around Jan Mayen and in the Barents Sea southeast we are now starting  impact assessment studies aiming at preparing for petroleum activities.
  
  
• These four areas will set the stage for many more promising decades for this industry.
  
  
• Both the EU, Germany and Norway have ambitious targets for the climate and energy policy. This includes large emission cuts, a strong focus on energy efficiency and increased production of renewable energy. Some have asked if oil and gas has a role to play in this picture.
  
  
• My answer to this is clearly yes. It is obvious that if we are to reach our climate targets we must focus both on energy efficiency and renewable energy. But his is not enough. We will still be dependent on fossil fuels for years and decades to come. This is simply a descriptive picture. Given this, however, it is important that fossil fuels will be produced in a good and energy efficient manner. Gas can play an important role as the most environmental friendly of the fossil fuels. Switching from coal to gas is an efficient way of cutting emissions. In the long run, we need to succeed with CCS.
  
  
• The world needs to create a price for carbon. Without a global price on carbon, we will not have the right incentives to develop technologies such as CCS.
  
  
• Gas can also play a part in Europe’s renewables ambitions. The reason is that a strong increase in renewable energy production will make it necessary with increased trading balancing capacity. We need backup for solar power and wind power on days where the wind is not blowing or the sun not shining. It could be mentioned that Denmark, with its high amount of wind power, uses Norwegian hydropower as backup. Even though Norway has a lot of hydropower, it is – unfortunately – not at all enough to be a backup for all of Europe. Gas, on the other hand, has this potential.
  
  
• In our view, we need to acknowledge this and base our policy on fact and not wishful thinking. We need to focus on energy efficiency. This has been labeled “a low hanging fruit”, and the potential is enormous. We also need to focus on renewable energy, and here a lot of things are happening. But we also need to acknowledge that fossil fuels are with us for the future, and we hence need to produce it as energy efficient and climate friendly as possible. And of course we need to focus on technology. We need to succeed with CCS, and we need improved technology on for instance offshore wind power.
  
  
• Only by following such a multi-track approach can we succeed. I hope this might be a starting point for an interesting seminar today.
  
  
• Let me conclude with a quote from Winston Churchill, who once said that: “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty”. I think we see a lot of challenges in the energy sector, let’s turn them into opportunities.
  
  
• Thank you for your attention.