Speech held at the 17th European Gas Conference

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• Thank you for the invitation!

 

• It is a pleasure for me to take part in the European Gas Conference here in Oslo.

 

• This is the 17^th time this conference is being held, and there is no shortage of good reasons to meet and discuss European energy policy.

 

• Two weeks ago, European leaders met at the European Council in Brussels. Energy was one of the main issues on their agenda.

 

• As President Herman Van Rompuy stated after the summit, this is the right moment for a strategic debate:

 

• “The world is in the midst of an energy revolution, coupled with a race for resources. Soon Europe could be the only continent to still depend on imported energy. Households feel the weight of high prices. Industry finds it hard to compete with foreign firms who pay half the price for electricity, like in the United States”.

 

• I could not agree more. I think that if you look at Europe today and see the unemployment rate and the immediate need to increase competitiveness and growth, energy policy is of vital importance.

 

• A comparison with the USA is interesting. The energy revolution taking place there is boosting the economy. It is hence not only an energy revolution, but also an economic revolution. In European energy policy, several issues need to be addressed.

 

• Both Europe and Norway have set our targets for 2020. Norway has committed to a renewable share of 67.5 percent in 2020, the highest figure in Europe. I am confident that this will work, and one of the main reasons is our market-based subsidy system – the green certificate scheme. However, renewables subsidies will not be the long-term answer.

 

• Instead of debating new renewables targets and new subsidy schemes post 2020, we should focus on the Emissions Trading System, ETS. If we are serious about cutting emissions, this is the most important instrument. Today, the ETS is not working. It is not providing the necessary level of security for investment.

 

 

Why gas?

 

• For Norway – as a major exporter of gas to Europe – EU energy policy is vital. It is important for us to stress the multitude of good reasons why gas should continue to play an important role in the European energy mix, also in the future.

 

• Our common goal is a sustainable energy future. A future of secure and environmentally acceptable energy supplies. In this regard gas is essential! It is as simple as that.

 

• Reliable access to secure energy supplies is a priority for all countries. For Norway and other gas supplier countries, secure and stable gas supplies are also essential in maintaining the attraction of natural gas.

 

• Following the Russian-Ukrainian gas crisis during the winter of 2008/2009, concerns about gas supply security have been a recurring theme in European gas debates.

 

• However, as Bob Dylan sang in the sixties: Times They Are A-Changin’. The diversity of gas supply sources has increased substantially in recent years. New gas supply sources will contribute to further increase European energy security in the years to come.

 

• Global gas resources are both abundant and readily available now. The International Energy Agency points to more than 250 years of technically recoverable natural gas resources at current consumption levels.

 

• Furthermore, gas is a very flexible energy source and gas power plants can be adjusted rapidly to ensure the best possible adaptation to real-time energy demand. These are key qualities when striving for increased energy security.

 

• Gas also plays a role in the fight against climate change. For the next two decades, only gas can bridge the gap if we are to effectively reduce the carbon intensity of energy production. Ignoring this could prove highly detrimental.

 

• In the fossil fuel family, gas is by far the cleanest member. Compared to old coal plants, gas combined-cycle power plants emit less than half as much CO2 for every unit of electricity generated. Modern coal plants are somewhat less dirty, but can still emit twice as much carbon as a natural gas plant.

 

• While we do need more energy from renewable energy resources, it is important to acknowledge that fossil fuels are still expected to account for a very large share of the foreseeable future global energy mix. Therefore, turning to the cleanest among them, gas, would be an effective measure. The effect would be immediate for largely coal-dependent countries.

 

• Furthermore, as the share of renewable energy must rise, gas has important qualities as a reliable and stable back-up for intermittent renewable energy when the sun does not shine and the wind does not blow.

 

• Norway wants to contribute to a sustainable energy future by being a secure and reliable supplier of natural gas for many years to come.

 

 

Future Norwegian gas production

 

• Norway provides around 20 % of the EU’s gas consumption. Natural gas production in Norway has grown more or less without interruption for 20 years, and we currently produce and export more than 100 bcm annually.

 

• Last year was record-breaking – with 115 bcm of gas produced on the Norwegian Continental Shelf. Production is expected to remain on å high level in the years ahead.

 

• To maintain a high level of gas production, we must develop new fields and expand the gas transport system. It is especially important to expand the system further north, because this is where we expect to find most of the undiscovered resources.

 

• The Aasta Hansteen field development and the Polarled projects are significant in this respect. They represent the most important gas developments in Norway since Ormen Lange and Snøhvit were completed in 2007. The projects extend the gas transport system beyond the Arctic Circle, thus opening up a new gas region in the Norwegian Sea.

 

• Gas from the Hansteen field will be transported through Polarled to the Ormen Lange facilities at Nyhamna. From here it can be exported to Europe through the Gassled system.

 

• These facilities are not only being built for the resources in the Hansteen field – they are designed to secure future gas production from the entire area. The facilities will be built with considerable spare capacity, allowing new fields to be tied in.

 

• A similar approach is probably needed in the Barents Sea. In the absence of a single major gas discovery that can finance a large new export facility on its own, a coordinated effort is necessary.

 

• With the Snøhvit field in production, the Goliat-field under development, the Johan Castberg discoveries in planning phase and an appraisal well ongoing at the Norvarg discovery, the Barents Sea is turning into a full-fledged petroleum province. An extensive exploration program is also underway, with several new, exciting wells being drilled both this year and next.

 

• Finding a transport solution for Barents Sea gas is key – both for the continued development of the Barents Sea as a petroleum province, and for Norway as a long-term supplier of gas to Europe.

 

• Today, the Snøhvit plant provides LNG for the world market. One option is to expand this capacity. A second option is to build a pipeline connected to the Gassled system. The latter option would secure energy for Europe and for European growth, hence also increasing Europe’s security of supply. This is, however, a commercial decision.

 

• I believe that the resources are there, that they will be discovered, and that they will be developed and brought to the market. But we need long-term and predictable markets. These are huge investments, not least in infrastructure. This is why signals from Europe are important for us. This is why we want a clear signal that Norwegian gas will continue to be an important part of the European energy mix.

 

 

 

Gassled tariffs

 

• I believe that Norwegian gas production will remain at a high level in the years to come. We are working continuously to ensure this, also when we decide on tariffs.

 

• A long-standing principle in Norwegian petroleum policy is that profits should accrue at the fields and not in the infrastructure. Low costs in the pipelines and in the processing plants are important to ensure efficient use, and to promote the development of more resources.

 

• This is particularly important as the industry moves further north, with greater distance to the market. It is also increasingly important when more marginal resources are developed in mature areas.

 

• We have recently proposed lower tariffs for future bookings in Gassled, for precisely this reason. To achieve good resource management, it is crucial that the companies find it interesting to pursue all socio-economically profitable resources.

 

• Lower tariffs in pipelines and processing plants are also important in paving the way for establishing and choosing the right transport solutions. The Gassled owners will still earn a reasonable profit.

 

• The proposal was submitted for a public hearing from January to March. The Ministry is working towards a final decision before July 1st.

 

 

The future of the Norwegian Continental Shelf

 

• Currently, 77 fields are in production on the Norwegian Continental Shelf. Last year, these fields produced about 1.9 million barrels of oil (including NGL and condensate) per day, and 115 billion standard cubic metres (Sm3) of gas.

 

• The Norwegian Petroleum Directorate’s base estimates for discovered and undiscovered petroleum resources on the Norwegian continental shelf amount to approximately 13.6 billion standard cubic metres of oil equivalents, or about 85 billion barrels. Of this, about 40 percent has been sold and delivered.

 

• There is therefore still a substantial resource potential left on the Norwegian Continental Shelf!

 

• The government would like to see a high activity level on the Norwegian Continental Shelf also going forward. This is needed for us to take benefit of the full value potential that sits in our oil and gas resources. 

 

• The government recently announced an adjustment in our petroleum tax system. The reduction of the uplift will reduce post-tax profits for companies when they investment in our petroleum sector. However, the change is not dramatic. Our petroleum tax system will still be investment friendly.

 

• In 2011, the government proposed an updated strategy for the petroleum sector in a White Paper. The White Paper received support from all political parties in the Parliament.

 

• The White Paper points out that maintaining high production levels from our shelf – also in the future – is very much achievable. We pledged parallel and active commitment to:

 

• increase the recovery rate in existing fields;
• develop all commercial discoveries;
• continue to explore;
• and to open new areas.

 

• I think it is fair to say that the government has delivered quite well on this strategy.

 

• Just last week, we announced the location of a new research centre for petroleum activities in Arctic areas. We have also decided to establish a research centre for improved recovery.

 

• I expect the Parliament this month –for the first time since 1994 – to open new areas offshore Norway for oil and gas activities. This is the southern part of our new waters in the Barents Sea following the delimitation agreement reached with Russia in 2010.

 

• The number of exploration wells has increased considerably, and is now at a level between 40 and 65 annually.

 

• We also follow up on our strategy in the licensing rounds, both in mature and new areas. And for those of you who are especially interested in this, we expect to announce the 22nd licensing round in the very near future.

 

 

 

Conclusion

 

• To conclude: There is now a debate on the future European energy mix. This is an important debate – both to follow and to take part in.

 

• Our view is that gas is a fuel for the future. It is the cleanest of the fossil fuels. It is flexible. And it works well as back-up for intermittent renewable energy.

 

• Norway has been a stable supplier of natural gas to Europe for decades. A role we intend to continue for many years to come.

 

• Thank you for your attention!