Speech at the Autumn Conference

Check against delivery

Ladies and gentlemen,

It is a pleasure to be here again at “Det Norske Teatret” for this year’s Autumn Conference. This has become a valuable meeting place for discussions of both the energy picture and the energy trends globally. The conference is hosted by Statoil and jointly organised with the IEA – the International Energy Agency – and the Ministry of Petroleum and Energy.

I look forward to listen to the keynote from IEA’s Chief Economist, Doctor Fatih Birol, later this morning. The presentation of facts and numbers from the World Energy Outlook is a crucial part of our event today.

Two weeks ago I visited North Dakota. There, some three kilometres under the prairie, is the Bakken shale formation with huge reserves of what we used to call unconventional oil. 

Today, Bakken is certainly not unconventional anymore. New drilling and production techniques have made it possible for oil production to skyrocket to about 700 000 barrels per day. And it is still increasing. Slightly less than 700 000 people live in North Dakota. This means that they produce more oil per capita than we do in Norway. This affects the rest of society.

It was interesting and important to be there and to experience the dynamics and developments in this society. In 10 years North Dakota has gone from the 39th to the 9th place in US income per capita.

Total oil production from the Bakken field and several other shale formations with tight oil in the US has now reached 2 million barrels per day and is increasing rapidly. In comparison, this is about the same volume as the oil production on the Norwegian continental shelf.

Together with the large and more mature production of shale gas, the implications of these developments are tremendous for the economy in the US.  The American dream of energy self sufficiency could be within reach in a decade or two.

It is difficult to envisage the full consequences of this change, but some implications are already evident.  An abundant supply of gas is replacing coal in power generation.

Much of the coal is being exported instead, generating export earnings. Increased domestic oil production could shrink the import bill for oil. Last year crude oil import to the US represented nearly 60 per cent of the trade deficit.

I also notice that energy-intensive industries have started to move back to the US, and I feel a new spirit of reindustrialisation is emerging in America. Much of it due to the energy revolution.

According to the National Renewable Energy Laboratory, NREL, which I also visited two weeks ago 60 percent of new capacity addition up to 2035 will be gas in power production. This makes it possible for the US to get modern, efficient and clean energy.

Together with a democratic government, innovation in businesses and schools, and a growing population, the US has a lot going for them. My advice would be that the press should stop writing about global US dominance ending. Increased security of supply can have significant geopolitical consequences.

In the US, the shift from coal to gas has contributed to reduced emissions. We see that some of the excess coal from the US has found its way to power generation in Europe. Here, the increased availability of American coal combined with low prices for emissions trading allowances – have once again made coal a commercially attractive option in Europe. Hardly a choice for the future, in my opinion.

The emission reductions in the US are very positive, while the increased use of coal in the EU is a worrying development. In my speech at last year’s autumn conference, I pointed out that replacing coal with gas alone could nearly be sufficient to achieve the European goal of a 20 % reduction of greenhouse gas emissions by 2020. This is a point which needs to be repeated.

In my opinion, the EU is struggling. I think we need – as Europeans – to ask the question if detailed regulations and sector goals are the right approach. As an example: We are now in negotiations with the EU to be able to keep our hot water heaters. I think we both Norway and the EU have better things to spend our time on.

The carbon footprint of natural gas is much smaller than coal. In power production, natural gas emits about 50 per cent less CO2 than coal. The IEA has previously shown how natural gas plays an important role in all scenarios, also in a transition to a low emission future.  

Natural gas is a reliable and stable energy source for power generation. Being the cleanest of the fossil fuels, natural gas should be considered as a fuel for generations to come.

As the share of intermittent renewables rises in Europe, the redundancy of energy system must be strengthened. Gas-fired power generation combines baseload power generation and a flexible back-up option.

Norway will continue to be a stable and reliable energy provider for Europe. We have always combined sound resource management principles with strict regulations on safety and the environment. Let me give an example of this.

Since we started oil production in Norway back in the 1970s, there have been clear restrictions on flaring. Then, as early as 1991, Norway introduced a CO2-tax on offshore emissions. This gave incentives to cut emissions and encouraged technology development, such as CCS and power from shore.

Prudent regulations from the Norwegian government have resulted in one of the world’s lowest emission rates per unit of oil produced. That is positive – but we still have to push for even greater efficiency improvements as we go forward. Some argue that regulations like this reduce competitiveness. I would argue the opposite. They have made us early movers, and spurred innovation.

That is why I so strongly argue that we need a global price on carbon. Such a price will give the right incentives for cuts of emissions. In the long run, a global carbon price is the most potent instrument we have. It will create business opportunities and a private sector investment climate. As we see in the US, with the shift from coal to gas, price signals have a direct effect on consumer behaviour.

Norway has for many years been a significant producer of oil and gas. To maintain this position and to achieve maximum value creation, we need to maintain a high and stable level of activity. Our strategy includes efforts to increase the recovery rate from fields in production even further. We also want to make sure that profitable discoveries will be developed.

We will continue with active and thorough exploration in areas open for petroleum activities on the Norwegian Continental Shelf – a good example of this endeavour is the recently discovered Johan Sverdrup field.

In addition, we aim to open new areas for petroleum activities. Opening processes are ongoing in the South-Eastern Barents Sea and around the island of Jan Mayen. I hope that Parliament will approve opening of these areas before next summer.

One contention that has been raised in the debate in Norway lately is that we must leave most of our fossil fuels in the ground in order not to exceed the two degrees scenario. I would like to make it clear that the IEA report also stresses that fossil fuels will remain a significant part of the global energy mix in the future. Being the cleanest shelf and producing the cleanest fossil fuels globally, we could also have the effect that reduced Norwegian production actually would increase emissions globally.

Of course, this is not only about fossil fuels. Fossil fuels and our management of the rich resources at the Continental Shelf is only one of the many answers.

We need to move forward on renewables, we need to move forward on CCS and energy efficiency. We have very clear goals on all these areas: We opened the CCS test centre on Mongstad earlier this year. We have introduced a support scheme for renewable energy, giving Norway the highest renewable target in the world. And we are putting forward very strict regulations to ensure energy efficiency.

All in all, I think that this makes Norwegian energy policy and energy management good for Norway, good for Europe and good for the world.

Thank you for your attention!