with Jane Owen, British Ambassador to Norway, British Embassy of Norway
Norway is a special trade partner with the UK partly because it is so important for our energy interests, and also because it is very close and accessible for British companies. I see the energy sector as a driving force within the business relationship between our two countries. The opportunity is enormous: Scandinavia as a whole represents the UK’s sixth largest export market. Norway accounts over £3 billion in exports each year.
Recent developments on both sides of the North Sea and further north into the Norwegian Sea and the Barents are changing the pace of business opportunities in both Norway and the UK. Taken together, the UK and Norway will be the top destination for oil and gas investment over the coming years, with an estimated $280 billion projected in capital, equipment and services.
Norway’s proximity makes it a good market for UK companies of all sizes to penetrate, even if you run a relatively small company. There is no language barrier, the legislation and regulations are very straightforward, and Norway is easy to get to if you need to travel to talk to your contacts. It is a very popular market for first-time exporters, as the trade figures show.
The trade and investment relationship goes in both directions. The UK is Norway’s biggest export market, and many Norwegian companies are expanding investments and jobs in Britain. Both sides feel comfortable doing business together. I think Norwegians have a similar outlook on life, sense of humour and way of approaching business. In my own work I find it easy to talk to the government and business leaders because we speak the same language of open trade and competition.
What percentage of the bilateral trade comes from energy?
Energy accounted for a major share of our £27bn in bilateral trade in 2011. Norway exported £24bn to the UK – much of this was oil and gas supplies to power the UK economy. Norway supplies around 1/3 of the UK’s total energy requirements – making it a vital energy partner for Britain. Outside the energy sector, we also have significant trade in financial services, pharmaceuticals, IT, shipping, specialist goods equipment, and retail.
I think there are a number of reasons why the Norwegian and British continental shelves are quite exciting at the moment. Firstly, new discoveries have driven companies to see opportunities in mature fields in a way that was not possible a few years ago. We have been impressed by Norway’s success in finding fields such as Johan Svedrup, and hope to replicate this approach in British waters. I expect to see a high degree of interest from Statoil and others in the next UK licensing round.
Secondly, we are seeing new approaches to technology in areas like the Mariner & Bressay fields, which are two of the biggest undeveloped heavy oil projects we have seen on the UK side of the shelf. Statoil will be investing around $18bn and creating about 1,000 jobs in those two projects alone.
Thirdly, there is the potential for using new technologies such as Enhanced Oil Recovery in developing mature areas in the southern Barents Sea. This has led a number of UK companies to take an interest in licenses in that area. The UK and Norway lead the world in environmentally prudent oil and gas development, and this will be key to our work in new technologies and frontier areas.
In June the UK and Norway signed a historic energy partnership. This was the first visit by a British prime minister since Thatcher in 1986. What was the catalyst for this reinvigoration in the energy relationship?
Over the last few years the UK has put more time and effort into publicly demonstrating our friendships with countries who are historically and politically close to us, but where our links have developed quietly and out of the public eye. Obviously there have been countless contacts between our prime ministers over the last twenty years, but I think David Cameron really wanted to make a public gesture to stress how important the relationship is, partly due to the energy supply and therefore the energy security that Norway gives the UK.
I think it is also because the scope of the energy relationship has expanded beyond the traditional trade in oil and gas. Norway is very involved in a number of important renewables projects in the UK, including the Sheringham Shoal and the Dogger Bank windfarms. Sheringham Shoal opened this September and will bring power to 200,000 UK homes. Dogger Bank will supply 10% of the UK’s electricity. The renewables sector is a technology driver that has the scope to create new jobs and opportunities for both countries.
Prime Minister Cameron believes that the renewables sector is important not only because of the climate change challenge we all face, but also because it is part of the next industrial revolution. It is vital that the UK is seen as a green-growth leader, creating new technology and reducing costs, which will be good for both consumers and businesses.
One important partnership is Centrica and Statoil. This has created long term energy security for the UK through a 10 year gas deal, building on an earlier contract which will end in 2015. Centrica is also looking at getting involved in exploration on the Norwegian side of the continental shelf and is partnering with Statoil on developments on the UK side of the North Sea.
Another significant development was Aker Solutions’ decision to invest in jobs in London, Aberdeen and Stockton-on-Tees, building up their UK supply chain. The UK has a lot to offer investors looking for good engineers at all levels, links to research and universities, as well as an open and flexible labour market.
On the research side, the talks led to greater partnerships in areas like deepwater and coldwater drilling, EOR, and carbon capture and storage. CCS is a subject that we often talk to Norway about because Statoil and Aker are both investors in this technology. I went to the opening of the Technology Center Mongstad in Norway in May, and we are watching carefully to see what mew solutions this important centre will bring to the global CCS market. The UK’s CCS competition which will be awarded this autumn will, I hope, demonstrate that commercial application of CCS is possible and profitable.
The partnership also looked at renewables, which I mentioned earlier. In areas like offshore wind, we have seen Norway develop some big projects in the UK, but we are still in the early development phase. Oil and gas technologies are already driving new approaches to windpower, that will raise efficiency and bring down costs. The recent Renewables Obligation Banding Review has determined that we should be reducing the subsidies we give to onshore wind energy by around 10% as companies are gradually able to get better value for money in these projects.
Norway and the UK are now talking about linking the grid, so that both sides of the North Sea can integrate, making renewable energy generation more cost-effective. What is the vision for how this kind of renewable link between Norway and the UK will work out over the next few years?
Currently we have two electricity interconnector projects that are being pursued by partners on both sides. We are taking this step-by-step, and when people talk about a grand European energy grid I think we have to be clear that it will be seen as different parts of a jigsaw coming together. The Norway link with the UK is one of these parts. These interconnectors will provide a crucial link between Norway’s green hydropower and the UK’s electricity sector, which will include a lot of renewables and wind.
The UK is the fastest growing country for LNG imports. Norway is a pipeline exporter. How is this being worked out between the two countries?
In the UK our desire is to have a competitive energy market with a diversified mix of oil, gas, renewables, and nuclear. We want to have a good spread of piped gas and LNG, and to keep our options open. The long term contracts we have signed between Statoil and Centrica, as well as Scottish and Southern Electricity, and other ongoing negotiations, will definitely be part of the mix.
What can Britain and Norway achieve on the world stage in terms of their advocacy of cleaner energy and binding other countries to these types of commitments?
What happens in Europe is crucial for the world, and we need to show leadership in the green energy race. That is why, if you look at sectors like offshore wind, the UK is one of the leading countries in the world. We remain completely committed to our targets of having 15% of our electricity from renewables by 2020 and having an 80% reduction by 2050 in our carbon emissions.
Because Norway shares our ambition for national action, it makes it natural for us to work closely together on the international stage including at the UN climate negotiations. Both countries have tried to get more private money into developing carbon reduction projects like solar projects in India or biomass projects in China. You have to get the private sector and the big funds involved in order to see progress. We are strong supporters of UN efforts to establish a Green Climate Fund to mobilise private sector financing for green growth.
There is one project in particular that we are working on together called Energy Plus. In the forestry sector, we have collaborated on bringing in private sector financing and monitoring the results. The idea now is to do the same with clean energy. This would incentivize countries to get better access to private money provided they could demonstrate results in reducing carbon.
What would you like to achieve in Norway over the coming years?
I would like to see the energy sector go from strength for strength and I would like British companies in particular to take advantage of the expanding trade opportunities here. I would like more companies to be aware of how big an opportunity is present on both sides of the North Sea, and how much we can do together, not only in oil and gas, but renewables deployment as well.
The British Government organisation, UK Trade and Investment (UKTI), supports British companies with their export ambitions and help overseas companies grow in the UK. In Norway much of this work is related to the energy sector. My UKTI team supports many Norwegian and British companies entering our markets and forming partnerships. In the future I want more companies to take advantage of the support offered by UKTI. s