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Foreign Policy - Energy Policy A Norwegian Perspective

24 January 2007

Riyadh, Saudi Arabia

By Olav Akselsen, M.P. Chairman, Foreign Relations Committee of the Norwegian Parliament

It is a pleasure to be back in Riyadh. My pleasure is very much more than the climatic comfort of leaving a cold and dark Norwegian winter to enjoy the warmth of the Saudi Sun. My pleasure is very political and personal. I have greatly appreciated the warm hospitality of the 'Shoura', the host of my official visit to Saudi Arabia, and have benefited greatly from discussions with Saudi colleagues and high-level representatives of the Kingdom. This is not an easy or delightful time in international politics. And it is a time of energy challenge and concern. We need more dialogue and better international understanding to address successfully the many sensitive political issues of our day - not least in this region of the world - where Saudi Arabia, with her resources, tradition and wisdom has so much to contribute.

My last visit to Riyadh was in 2000. I was then Norway's Minister of Petroleum and Energy. I was attending the 7th IEF Ministerial. A very important meeting of Ministers of energy exporting and importing countries. And a milestone in the development of a purposeful producer-consumer dialogue. I remember vividly our gracious host, then Crown Prince and Deputy Premier of Saudi Arabia, HRH Abdullah ibn Abdulaziz Al Saud, presenting his vision for a better organised energy world through deepened dialogue and co-operation. He proposed the establishment of, and offered to host here in Riyadh, a permanent Secretariat to support and provide continuity to the producer-consumer dialogue at the level of Ministers in the IEF. Norway was one of countries standing first in line to support that important Saudi initiative.

Royal vision

Two years later at the 8th IEF in Osaka, Ministers endorsed the proposal. I would have liked to be there. But the Norwegian electorate wanted otherwise. National elections in the preceding year put me back in Parliament, in Opposition, but as Chairman of the Industry Committee. Later, I was very happy to see Saudi Royal vision become reality with the Custodian of the Two Holy Mosques, King Abdullah, inaugurating the impressive premises that we are gathered in this evening in November 2005. And may I add that little did I know, when listening to the then Crown Prince Abdullah at the Riyadh Ministerial in 2000, that a member of my Delegation sitting behind me, a Norwegian diplomat, would be elected the IEF's first Secretary General.
I am honoured for the opportunity to give this 3rd IEF Lecture during my second official visit to Saudi Arabia - this time as Chairman of the Foreign Relations Committee of the 'Storting', the Norwegian Parliament. I would like to share with you this evening some perspectives on the need, as I see it, to further develop and strengthen international dialogue and co-operation in energy. A need that I see not least from my present foreign policy vantage point. My perspective will be global. I will touch upon challenges that we share in relation to energy security, climate change and energy poverty. I will also put Norway on the world energy map highlighting her importance as a reliable supplier of much needed oil and natural gas.
What better time to underscore the importance of dialogue than now? When energy security tops the political agenda world-wide. When increasing attention is being paid to the interrelationship between energy, environment and economic development as well as to the links between energy and geo-politics. In our globalising and interdependent world.
And what better place to underscore the importance of energy dialogue than in Riyadh? Not only considering Saudi Arabia's abundant petroleum resources. But also her position in the politics of oil and role in international affairs. Not only as a member of OPEC. But also having emerged as a key focal point for global energy dialogue by supporting the International Energy Forum and hosting its Secretariat.

A Common Energy Future

This year we are celebrating the 20th anniversary of the report of the World Commission on Environment and Development entitled 'Our Common Future'. My choice of the word 'celebrate' is deliberate. Not only because this UN Commission was chaired by Norway's then Prime Minister Dr. Brundtland. But mainly, because it put the concept of 'sustainable development' at the very top of the international political agenda. For discussion and for action - nationally, regionally and globally. It is still there today, with action more urgent than ever before.
The World Commission Report acknowledged how crucial energy is for sustainable economic and social development. It highlighted the importance of oil prices and reducing market volatility. It recommended that new mechanisms for encouraging dialogue between consumers and producers be explored. On that note Prime Minister Brundtland called in 1989 for an informal 'Workshop of Ministers' of energy producing and consuming countries to discuss the resource and market outlook as well as the links between energy and environment. Two years later, at the initiative of President Mitterand of France and President Perez of Venezuela, the first such Ministerial meeting took place in Paris. The following year, Dr. Brundtland convened the Second Ministerial Workshop in Norway.
I have followed with great interest the trek of IEF Ministerial meetings that ensued - from Norway to Spain, and from there to Venezuela, India, South Africa, Saudi Arabia, Japan, the Netherlands and last April to Qatar. Gathering more and more Ministers. This unique dialogue has, in my view, cemented the awareness of a shared interest in stable and sustainable global energy developments, in reducing market volatility and ensuring prices that are reasonable for producers and consumers of energy. Let me wish Italy all success in hosting the 11th IEF Ministerial in Rome next year. Italy and co-hosting countries India and Mexico can count on continued active Norwegian support in further developing this global co-operative process.

Sustainable Energy

Let me express my high expectations also with regard to the upcoming 15th Session of the UN Commission on Sustainable Development that will take place in May and which has Energy as its focal theme. Energy is the focal theme because of its importance for efforts to reach the Millennium Development Goals following up the World Summit on Sustainable Development in Johannesburg in 2002. Energy remains a key vehicle to promote sustainable economic and social development within a more equitable world order. I would say that energy is a defining issue of our day and age.
Energy poverty is widespread, a serious problem and clearly contrary to any ambition of sustainable development. Large parts of the world do not have access to commercial energy at all. More than one and a half billion people do not have access to electricity. We see energy consumption in developing countries such as China and India increasing rapidly in support of persistent strong economic growth. This is encouraging and most welcome. Without access to energy, people are doomed to poverty and misery. This is a question about distribution of energy, not lack of energy resources as such.
We expect a substantial increase in world energy demand in the years ahead. An increase of fifty percent from today's level. Most of the increase will come in developing countries and fossil fuels will continue to be the dominant element of the global energy mix, even with strong government policies to support renewable energy. This also means further increases in CO2 emissions underscoring the need to act now to address the issue of climate change. Renewable energy - such as wind and solar - is likely to increase rapidly in the years to come, but from a very small base. Nuclear power can be an attractive alternative from a climate change perspective, but in many countries, including Norway, public opposition towards this energy form is strong. Not an easy task to meet the growing energy needs while safeguarding the environment and combating climate change.
For oil and gas producers, climate change is a twofold threat. In addition to the adverse global impact of worsening climate, also the risk of demand for our products being undermined by measures to curb CO2 emissions. But let there be no doubt about it. We do need to take urgent action to curb CO2 emissions.
Cleaner technologies for production and use of fossil fuels are being developed. And Carbon dioxide capture and storage (CCS) can play an important role in the portfolio of mitigating actions that can stabilise atmospheric greenhouse gas concentrations. As was underscored in the EU-OPEC workshop on CCS here in Riyadh last September.
Norway has ambitious goals regarding capture, use and storage of CO2. In order to realise CCS technologies as soon as possible, the Norwegian government and Statoil have agreed to establish the world's largest full-scale CCS project in conjunction with a projected combined heat and power plant at Mongstad oil refinery in Norway. It will be fully operational by the end of 2014. We are developing groundbreaking new technology, which can become an export item and a guarantee for future petroleum activities in Norway. CO2 separation and storage is particularly relevant for oil producing countries. It has a potential to make fossil fuels carbon free. It could also boost production of oil when used as an Enhanced Oil Recovery method. And we have reservoirs to store CO2.

Energy Security

I have mentioned that energy security is at the top of the political agenda worldwide. It is a complex issue. Affecting energy choices, trade and political relations between countries as well as the environment. Oil and natural gas are strategic commodities crucial to the national interests of both petroleum-exporting and petroleum-importing countries. There is a geographical mismatch between the centres of global oil and gas production and consumption. International trade in energy will increase, but so will also the vulnerability of supply due to technical mishap or politically motivate attack and disruption. Substantial investments are needed in the years ahead to provide the infrastructure necessary to produce and to bring to market increasing amounts of energy. For oil exporters such as Norway and Saudi Arabia it is important that oil remains competitive in the energy market with respect to price, security of supply and with respect to environmental properties. Less volatility in the oil market and prices at a reasonable level for both consumers and producers is an IEF objective that Norway shares to the full.
Energy-importing countries want security of supply from exporting countries. Energy-exporting countries want security of demand from importing countries. The Ministerial level dialogue in the IEF has brought these two sides of the energy security coin to the fore. The IEF Ministerial last year discussed energy security as a 'shared responsibility'.
Some countries are seeking to safeguard energy security concern by policies of energy independence. Others by energy interdependence. I am attracted by mutually beneficial energy interdependence, not least against the background of European experience in how energy co-operation has developed and enhanced wider economic and political ties between countries.

Norway on the Map

Where then is Norway on the world energy map? You will know that we are up in the North, not far from the North Pole. Our country of some four and a half million people is the world's third largest exporter of oil. Only Saudi Arabia and the Russian Federation export more. We also export substantial amounts of natural gas to countries of the European Union. Of which, we are not a member, but with which we are part of the European Economic Area. Almost a third of the EU's gas imports come from Norway.
Norway belongs to the OECD group of industrialised countries, our main trading partners. We participate actively in the International Energy Agency on the basis of a Special Agreement. As a major exporter of oil and natural gas, Norway also has important interests in common with other petroleum-exporting countries in and outside of OPEC. We do not have any formalised affiliation to OPEC as an organisation, but we do have close and on-going contact with OPEC members, not least with Saudi Arabia, on a bilateral basis.
In a word, Norway has, as an industrialised, petroleum-exporting country, a unique range of interests. This unique range of interests has made it a natural and long-standing Norwegian foreign policy as well energy policy objective to promote producer-consumer dialogue and co-operation. It is natural for us to see the interrelationship between energy, environment and economic development in its wider and holistic global perspective.

Richly endowed

Norway is richly endowed not only with oil and natural gas. But also with renewable hydropower, which accounts for almost all of our electricity generation and which was the basis for the industrialisation of Norway and the creation of our welfare state. Today, exports of oil and natural gas fuel our economy and the further development of our society. The petroleum sector accounts for a quarter of our GDP and half of our total exports. Petroleum revenue is put into special fund for later use to the benefit of future generations - the fund, now at almost USD three hundred billion, is growing.
Norway has exported a high of more than three million barrels of oil in recent years. Our oil production seems now to have peaked and could this year be around 2.6 mbd, a level we expect to sustain for some years. Our international importance as exporter of natural gas, however, will grow substantially in the years ahead. Recent forecasts indicate that gas production, last year 80 billion cubic metres, will continue to increase and could reach a level of around 120 - 145 billion cubic metres in a few years time.
And still, there are large undeveloped resources on the Norwegian Continental Shelf. Some two-thirds of our resources are yet to be developed. In a world that needs increased supplies of energy, we have a responsibility to exploit these resources in a sustainable way. We are prepared to continue to supply our trading partners with substantial amounts of oil and natural gas reliably and in a long-term perspective.

Oil for Development

With her long tradition and international profile in providing aid to developing countries, Norway appreciates the crucial importance of energy for societal development. Indeed, petroleum resources play and will play an important role in a number of developing countries, holding great promise as a vital resource to accelerate their economic and social development. In some developing countries, however, indigenous petroleum resources do not seem to have been translated into desired degree of improved welfare for their inhabitants. And have, perhaps, been more of a 'curse' than a 'blessing'. The combination of large and sudden inflows of revenues from petroleum exports and lack of well-functioning domestic institutions and governance systems increases the risk of corruption, rent seeking, conflict, dependence and crowding out of industries. As a result, many developing countries score conspicuously low on indexes of international development performance.
Several decades of oil and gas experience have given Norway broad competence across the full cycle of petroleum sector management. National control, strong institutions and well-educated public servants have been important features of this process, but also the involvement of the international oil and gas industry has been fundamental. Drawing on this experience, Norway has already provided assistance to the oil sector in developing countries since the early 1980s. The demand for Norwegian assistance in petroleum sector management has increased steadily. Norway is now cooperating directly with more than 15 countries, covering areas such as legal frameworks, administration and supervision mechanisms, licensing and tendering processes, organisation of public/private interfaces of petroleum governance, local content and industrial development, environmental challenges and revenue management issues, including taxation and petroleum funds.
Against this backdrop and increasing global focus on these issues, Norway launched in September 2005 an 'Oil for Development' initiative to assist developing countries in their efforts to benefit from their petroleum resources in a way that generates economic growth and welfare to the population in general, and that is environmentally sustainable. Working with other donors to address the challenges of petroleum administration and management more forcefully, the initiative enhances the focus on good governance, transparency and anti-corruption as well as environmental challenges.
Let me in this context mention that Norway has provided a special additional financial grant to the IEF Secretariat this year earmarked for the promotion of the Joint Oil Data Initiative in developing countries. Norway is co-sponsoring the IEF Secretariat's regional JODI training session for Sub-Saharan African countries in Johannesburg next week.

Better Data and Transparency

The oil and gas industry generates huge revenues. An industry of great importance to the economy of individual countries and the well functioning of the global economy. Transparency with regard to revenues, market data and resources is important both for those countries rich in petroleum resources and for those countries, which import oil and gas.
I am happy to emphasise Norway's support to the Joint Oil Data Initiative that the IEF Secretariat is managing with the support of the IEA and OPEC, APEC, the EU, OLADE and the UN. We see in JODI a unique vehicle to bring about the greater transparency and better data that can reduce market volatility and enhance global energy security. We are happy to see the increasing attention that JODI is getting on the international scene. Not least the importance attached to expanding JODI and improving the quality of data by the G8 Heads of Government in the St Petersburg Plan of Action on Global Energy Security adopted at their Summit last year.
Reliable and accurate oil market data are vital to oil producers and consumers, to governments and companies and for the financial markets. Norway finds it particularly relevant to support JODI, a concrete outcome of the producer- consumer dialogue and other initiatives that can enhance dialogue and trust among countries and participants in the oil market.
Greater transparency and data accuracy is also required with regard to oil reserves. In several, major oil-producing countries there are uncertainties about the true size of oil reserves. For long term planning, relevant and reliable information on oil reserves is essential. In its support to JODI, the G8 Summit also called for the development of a global standard for reporting oil and energy reserves. I am happy to see the IEF Secretariat taking part in the discussions initiated by the UN, through its Economic Commission for Europe, in this regard.
Let me also highlight the importance of the broader Extractive Industries Transparency Initiative (EITI), the purpose of which is to support good governance through the transparency of revenues. An issue of great relevance is good resource management. Norway hosted the Annual Conference of the EITI in October last year and is proud to have been chosen recently as host country of the new Secretariat of the EITI. I am looking forward to what increased interaction between the EITI and JODI can bring to global efforts for more transparency.

Regional Energy Ambition

Getting back to my global point of departure, I see energy security remaining at the top of the political agenda worldwide. Requiring global approaches. But let me also underline the importance of regional co-operation. Europe is a case in point. It has seen the advantageous economic and political spillover effects of energy co-operation. Energy co-operation between France and Germany after the Second World War tied the economies of these erstwhile enemies together, building confidence and giving impulse to the development of the European Union. Today, after the Cold War, we see the emergence of new regional energy ambition also elsewhere, most notably in Asia, but also in Africa and Latin America. We also see new patterns of inter-regional co-operation. The IEA and OPEC are no longer exchanging blows. Their Secretariats are co-operating directly. IEA and OPEC countries co-operate with the many countries that are not members of their organisations in the International Energy Forum.
Norway's energy interests have regional dimensions as well. I have mentioned our contribution to the security of energy supply to countries of the European Union, the main markets for our exports of oil and natural gas. There is also an Arctic dimension, a vulnerable environment with great petroleum potential. And here our energy and political relations with the Russian Federation, the world's largest producer of petroleum, is key along with relations with other countries with which we share Arctic interests.

The Energy Road Ahead

I see a role for the International Energy Forum in providing a global political framework where the many regional, inter-regional and global co-operative endeavours can touch base and enhance forward-looking international energy co-operation.
The time has, however, passed when Energy Security was a focal theme exclusively for energy ministers. Given the importance of energy for national and global economic and social development, for the environment and for relations between countries, Prime Ministers are now talking about it. So are Finance Ministers, Foreign Ministers, as well as Environment, Trade and Development Co-operation Ministers - in addition to Energy Ministers. We see the importance of energy also reflected in the mosaic of domestic social and economic issues on our national Parliamentary agendas.
And lest we forget, core to all this political level energy activity, concern and hope is an international energy industry, with its technology, capital and human resources, doing the actual work. Supplying society with much-needed energy. Considering the crucial importance of industry itself, I am especially happy to see how the energy dialogue among Ministers in the IEF has now been expanded to include dialogue between Ministers and CEOs in the International Energy Business Forum.
All these developments hold promise. The energy road ahead will be one of increasing interdependencies. Not only direct interdependencies between energy producers and consumers. But also interdependencies emerging from the links between energy, environmental concern and global economic and social development. We should not underestimate the difficulties, complexities and bumps on the road ahead. The Energy Road Ahead will demand vision, dialogue, better understanding and co-operation based on awareness of the long-term interests that we share.
With these words, let me thank you for your attention. And let me wish the Secretariat of the International Energy Forum every success in its efforts to further enhance the producer-consumer dialogue at the level of Ministers in the IEF. A venue and confidence-building process of increasing importance for win-win international energy co-operation.