Tale på The Petroleum Institute

The Petroleum Institute, 16 April 2013
Minister of Petroleum and Energy Ola Borten Moe

Your Excellencies, Ladies and Gentlemen,

I am very pleased to be here today, and to talk about energy and energy policy – topics of very high importance both to Norway and Abu Dhabi, and the world. We are both small countries, but large energy producers.

Let me start by saying some words about the challenges we are facing in the energy arena.  Access to energy is crucial to economic and social development.  There is no doubt that the need for energy means a substantial increase in demand for energy.

According to all IEA scenarios, the need for energy will increase dramatically towards 2035. Even within the 2 degrees scenario, most of the energy used will come from fossil fuels.

To supply the market with enough energy is not an easy task.  Today, energy consumption is 80 percent based on fossil fuel. One third of this is coal. In the future we need to be less “carbon addicted” and also develop an economically sound technology for Carbon Capture and Storage, CCS.

We have to work in parallel. There is no easy answer. We have to do many things at the same time. Maybe, the combination of all the approaches and strategies will give us a good result in the end. We need to be more efficient when it comes to the use and production of energy and transform ourselves to a less carbon intensive society.

Stable oil and gas markets are import to producers and consumers. Regulation, information, data and dialogue are all important factors in minimizing huge price fluctuation. OPEC plays a very important role in stabilizing the market. It does not that mean that oil and gas prices will not change. I’m sure they will in the future, as they have done in the past.

Lately, we have seen large changes in the international energy markets, due to what we can call an energy revolution in the USA.

Production of unconventional oil resources and shale gas, implies that the American dream of energy self sufficiency could be within reach in a decade or two.

It’s too early to conclude what will be the implication on the global oil and gas market of the tight oil and gas revolution. But, new capacity is needed to meet the growing demand. In my opinion, if the world economy picks up in the way we all hope it will, I’m a firm believer in stable prices at the current level or above.

On a regional basis the implications of US shale oil and gas are substantial. By shifting from coal to gas, US emissions are reduced. Instead of being used, much coal is exported – for instance to the European market.

This creates a very interesting dynamic. The US is now reducing their emissions while at the same time increasing their ability to compete. Europe is decreasing its ability to compete and increasing their emissions. I think the first development is better than the latter.

I also think there is no reason to underestimate the impact this will have on the US economy. They have been working hard to reduce their trade deficit and if they are allowed to produce their energy alone, this measure alone will almost remove the deficit and create houndreds of thousands, maybe millions, of new jobs within the United States.

The American energy revolution obviously also has consequences for a gas exporting country such as Norway. But for many reasons I don’t think the development will have the same impact on the global gas markets.

We will probably see some changes, but there will still be regional differences on the price level, in the same manner we see today.

The Norwegian petroleum resources were first discovered in the late 1960s. It is fair to say that we have seen an incredible development since then.

Norway is a substantial producer of oil and gas – ranking as the seventh largest oil exporter and number 14 among the oil producing countries. We are the third largest gas exporter, and the world’s sixth largest gas producer (according to figures from 2011).

When petroleum resources were discovered on the Norwegian Continental Shelf in the mid-1960s, the day before Christmas Eve, we decided to invite the international oil companies to take a lead in the first phase of our oil and gas activities.

It is important to note that the Norwegian petroleum adventure would not have been possible without the presence of foreign oil companies. At the time, Norway possessed no national competence, expertise, and probably not the capital needed as a host nation for oil and gas. Attracting international oil companies was both a necessary and successful strategy. We had the oil and gas resources under the seabed.  The international companies contributed with their skills and knowledge, both to discover fields and to develop and produce them.

This provided results. Production and activity increased. State income increased. Norwegian oil companies, as well as a supply and a knowledge industry, were created.

We succeeded in developing the national company Statoil, which has truly become an international company with activities all over the world.

The high profits from the petroleum activities were transferred to the state – and thus the Norwegian people – through a special tax of 50 percent on top of the ordinary corporate tax of 28 percent. In addition the Government holds a substantial direct ownership to resources, as well as assets.

Currently, 76 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 about 111 billion standard cubic metres (Sm3) of gas. Most of the gas is exported to Europe. And the Norwegian gas sums up to about 20 percent of the total gas consumption in the European markets, making us slightly smaller than Russia.

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. Of this, 44 percent have been sold and delivered.

There is therefore still substantial resource potential left on the Norwegian Continental Shelf. The Shelf is large, more than 3,5 times the Norwegian landmass. Large parts of it has yet not been opened up and far less discovered for petroleum activities. We are now in the process of opening up some of these areas – in the south-eastern parts of the Barents Sea - which include the former disputed area between Norway and Russia. We hope to open some of these areas before the summer.

Norway will be a major producer and exporter of petroleum in the foreseeable future. We have seen a decrease in the Norwegian oil production since we reached a peak in 2001, when we produced more than three million barrels per day. We hope to keep today’s level and even increase somewhat when new big discoveries will start production. For gas, however, the picture is the opposite. Our natural gas production is more or less stable.

We have also made large discoveries the last couple of years.Discoveries that will enable os to stabilize production and, perhaps, if we find more, we might even be in the position to increase production.

In my mind, there is no doubt that oil and gas has been a gamechanger to Norw society. It has contributed to wealth and development for the whole population. But rich natural resources is not enough by itself. It is an opportunity that needs to be managed. The Norwegian success story stems mainly from the fact that we have been able to develop our society further, create opportunities for the whole population, and invest in human capital.

Far more important than the discovery of oil and gas on the Norwegian continental shelf in the late 60s, has been the impact of increased women participation in the workforce in the Norwegian society. Without equality between the sexes, and the large contribution from Norwegian women over the last generation, neither the Norwegian welfare state, nor our huge economic growth and development would have been possible. Therefore, I believe it is both encouraging and important to see so many women here today.

 

The government is working hard to maintain a high activity level on the Norwegian Continental Shelf. 

 

In 2011, the government put forward an updated strategy for the petroleum sector in a White Paper with the title: “An industry for the future”. The White Paper received support from all political parties in the Parliament.

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

• increase the recovery rate in existing fields;
  This is perhaps one of the most important issues on the Norwegian shelf. If we increase our average recovery rate by one percent, we increase the income for Norwegian society in the range of 60 to 70 billion US dollars.
• We need to to develop all commercial discoveries;
• We need to continue to explore, also in mature areas. Two years ago we discovered Johan Sverdrup, the world’s largest offshore oil field that year, in the most mature area on the Norwegian shelf. We had been conducting seismic and drilling for almost fifty years. This also shows us that geology always has something new to offer. You never know.
• Lastly, we need to open new areas to the industry.

The petroleum industry’s research and technology projects are major contributions to long-term knowledge development and competitiveness within the Norwegian petroleum sector. The public research and development effort plays an important role in triggering research and technology development that would otherwise not have been carried out.

An important example of the value of continued research and development is how increased oil recovery is creating value and extending lifetimes of fields on the Norwegian Continental Shelf. I am proud of the Norwegian track record here. 

Our average oil recovery rate is high compared to other oil provinces. But we aim to do even better. 

 

Statoil is already a world leader in increased oil recovery. The ambition is to be even better in the future, and work hard in order to achieve the goal.  

During the last years, we have seen a very high activity level on the Norwegian Continental Shelf. We have also seen very good exploration results. 

Our biggest discovery – Sverdrup – holds resources estimated at between 1,2 and 2,5 billion barrels of oil equivalents. It was the largest offshore discovery globally that year. 

In addition to this, the Skrugard discovery in the Barents Sea was the third biggest. The current estimate of Skrugard is 400 to 500 million barrels. This is a breakthrough in this area and opens up a new oil province. I am convinced that this will unlock huge amounts of resources for the future.  

The delimitation agreement reached with Russia in 2010 has opened up new areas for exploration in the southeastern part of the Barents Sea. This underlines the importance of the High North in an energy context.

In sum, developments the last couple of years indicate that Norway will continue to be a significant oil and gas producer In the forseeable future.  

Access to new acreage is important for the petroleum industry. The Government is now working to open new areas for petroleum activity. 

The yellowish areas shown in the map are currently under review. The red areas on the map are presently not yet opened for petroleum activity. As you can see they are in the High North, far north of the northernmost part of Norway.

They cover the areas around Jan Mayen and the new areas in south-eastern part of the Barents Sea – this is the Norwegian part of the formerly disputed area with Russia.

The aim is for the government to take a decision on the south-eastern part of the Barents Sea before the summer. On Jan Mayen, we need some more time before a decision can be taken.

I think this further underlines the fact that we are now entering the Arctic at full speed. We are heading to the north and east. This also underlines an important part of Norwegian oil history. We startet out far south, in the southernmost and green part of this map. As we have achieved knowledge, competence and the need to develop, we have been moving north, into deeper waters, deeper into the sea bed, with wells with higher pressure and higher temperature. Now we are moving north, where it not only is dark during the winter. There may also be ice.

In other words; we see an industry that is extremely innovative, adaptable, and able to meet new challenges when needed. This, I believe, is extremely important.

 

40 years with challenges at the Norwegian Continental Shelf has created an innovative petroleum industry. The Norwegian petroleum industry has world class technology and expertise and is successful in all major petroleum provinces. 

Fields on the Norwegian Continental Shelf have often been in deep waters, in remote areas with no infrastructure in place. This is why technology has been vital to develop resources and to make them ecomomically viable, and possible to do with environmental standards.

Thanks to thid development, the industry has not only been able to develop cutting edge technology.  It has also made it possible for Norway to to what we have been doing.

Let me say something about this illustration. This is the latest innovation  from the Norwegian continental shelf. It is a subsea production system. It contains subsea compression and multiple flow over long distances in deep waters.

Fairly recent technological advances made the development of Snøhvit and Ormen Lange possible. The Snøhvit gas field in the Barents Sea was discovered in 1984 and the field would not have been economically viable without a subsea solution and multiphase flow.  

Another technology step forward is the Åsgard subsea compression project. This is the illustration you can see behind me now. This installation is the size of a football field.  

The closer the compression is to the well, the higher the efficiency and production rates become. Other fields on the Norwegian continental shelf are planning technology tests and qualifications similar to those practised on Åsgard in order to increase the recovery rate.  

The engagement and interaction between oil companies, industry and research institutions have been fundamental in finding solutions to technological challenges.

This is also reflected in the international success of Norwegian companies.  I would also like to say that even though the main focus is oil and gas, I think it is reasonable to finish by saying something about renewable energy. We have reached oil and gas resources in Norway. We export most of them. At the same time we are working hard to bring our society into a greener direction with more use of renewable energy.

The fact that the world needs more energy, and more fossile energy, is not an excuse for us to use more of it if we do not have to use it. So we try to push ourselves, be more renewable and go greener. 

In Norway, renewable energy is foremost hydropower. Norway is the sixth largest producer of hydro power in the world. I have noticed that there is not a lot of fresh water here in Abu Dhabi, but you have a lot of sun.

I would also like to add another point. It is not only a matter of supply, of adding new resources, new capacity and increase the supply side. It is also important to look at how we use these resources as efficient as possible: How we can turn the whole economy and the way we use electricity in our houses, how we use petroleum in our cars and how to use it in a more efficient way in order to keep the level of resource use at a minimum and at the same time provide the world with energy and resources.

Norway, together with Iceland, has the largest share of renewable energy production – and consumption – in Europe. Nearly all of the electricity production comes from renewable energy sources. The share of renewable energy in the total energy consumption is about 60 percent today. This figure will increase further in the years to come, and will reach 67,5 percent by 2020. This is the highest number in Europe, and probably in the world. It’s very ambitious, and a legally binding target for Norway.

To sum up: The world needs more and cleaner and secure energy. Norway will do our share to deliver just that. By a parallel and active commitment to both increased recovery rate, development of discoveries, exploration and offering new acreage to the industry, Norway will deliver stable production of oil and gas in the decades and generations to come. We will make production and consumption of oil and gas even more efficient and thereby more environmentally friendly. In addition we will continue to transform our society into a greener direction with even more use of renewable energy.

Thank you for your attention!