H.E. Jens Eikaas – Norwegian Ambassador to the UAE, Abu Dhabi
Norwegian ambassador to the UAE, H.E. Jens Eikaas, provides an overview of Norway-UAE bilateral relations, the various areas of economic cooperation including but not limited to oil and gas, his perspective on the outlook of the petroleum industry in both Norway and the UAE as well as his vision for the development of bilateral relations over the next few years.
You have been Ambassador to the UAE since fall of last year. Can you provide an overview of Norway-UAE bilateral relations and your main priorities for your team?
I am responsible for the standard ambassador’s portfolio of duties. My main task is to promote and serve the bilateral relationship with the country that I cover. The UAE and Norway have been working closely on a number of areas for a significant period of time now, and Norway is keen to maintain the good existing relations we have with the UAE and to develop the relationship further.
Another objective that has increased in importance through the years is economic diplomacy, and this means assisting Norwegian businesses in establishing themselves and operating commercially in the UAE.
Any relationship between two oil and gas giants like Norway and the UAE must invariably feature petroleum as a common denominator. In particular, I want to highlight that the UAE has long since had an interest in Norway because of the way that Norway has managed its petroleum resources. As a young country, the UAE government has had the remarkable prescience and astuteness to study other countries’ performance and policies across many industries in order to glean lessons from them. What they identified was that the Norwegian model of handling petroleum wealth is a good model on which to base their own economic development. Notably, they saw that it is a wise idea for a country to retain control of their own energy resources and this is what they have been – and are – doing. In the five decades following the discovery of oil, the UAE has come very far in terms of developing the industrial and technology base for petroleum production, and in many ways, they are at a stage where, just like Norway, the UAE can manage their own resources for their best interests.
When the petroleum era began in the 1960s, I was just a child and I grew up with the industry. I am very conscious that I – and Norwegian society – owe our excellent welfare system and our general prosperity to the Norwegian model of leveraging petroleum wealth into sustainable economic development for future generations. Given the importance of the oil and gas sector to both countries, it is only natural for me to cultivate a background in this particular area and this is facilitated by my lifelong interest in the industry.
Before we focus on oil and gas specifically, what are some other important areas of bilateral relations between Norway and the UAE?
While oil and more broadly, energy, is the core industry for both economies, there are a couple of other sectors that are also important. Firstly, seafood is the second-most important sector in Norway, and it is important to bilateral relations as well. A relatively unknown fact is that Dubai is actually the tenth-largest city in terms of the import of Norwegian seafood. Not all the seafood imported into Dubai is consumed in the UAE, but Dubai is the main distribution hub in the region. We are keen to increase trade in this area even further, using the UAE as a base into the region.
The maritime sector is also important to both countries; both Norway and the UAE have longstanding maritime traditions, with both countries having depended on the sea for centuries before the modern economy was built. The Emiratis caught fish and harvested pearls long before they extracted oil, for instance. Norway depended on the sea for food and transportation. With this legacy, Norway is still a considerable global maritime actor. Within the UAE, there are a number of Norwegian companies involved in maritime activities of various kinds, from basic maritime transportation and maritime services to the export of shipbuilding equipment and oil platforms.
Finally, a smaller but growing sector is the defense industry. Norway does not have a very big defense sector but it is very specialized and we have established ourselves as world leaders in some niches. The UAE has taken an interest in some of these products. For instance, the Norwegian company Kongsberg Defense Group has a partnership with the American Raytheon relating to missile defense systems. The missiles are supplied by Raytheon while the missile delivery platforms and the guidance and radar control systems are provided by Kongsberg. There is much potential for further collaboration and development in this sector.
Turning to oil and gas, with the rise of Asian power nations, like India, South Korea, China and Japan, increasing their operations in this region, for instance, with Japan’s state-backed energy explorer, Inpex, winning a monumental 5 percent stake in ADNOC’s onshore fields in 2015, how do you plan on ensuring that Norway remains a partner of choice for the UAE?
Despite the competitive landscape of this region, Norway continues to have a lot to offer to the UAE. First and foremost, we have a well-deserved reputation for quality and efficiency, which is becoming increasingly crucial in this oil price environment. This stems from our own petroleum industry background: Norway has a very challenging petroleum exploration and production (E&P) environment with high production costs. This means that we have had to be very creative in the way we extract and manage our resources. In response to the challenges of our environment, we have developed a host of novel and interesting technology that have positioned us as global leaders in the petroleum industry. While the physical environments in the UAE and Norway are starkly different, our expertise, experience and even much of our technology remain of great value to the UAE.
In addition, I believe the Emiratis are quality-conscious. When they search for the best solutions, they naturally look towards Norwegian companies because we have a reputation for quality. In terms of competitiveness, Norwegian technology has a reputation for being expensive, but there are two ways of looking at this: cost versus value. A cheaper solution may be lower in cost in the short term but there is no reliability or security in terms of its long-term performance and you may ultimately spend more on fixing it. There are always price pressures in difficult times like this and companies may be tempted to choose the cheaper solutions but in terms of long-term value, Norway is still a clear partner of choice for the UAE.
The Norwegian embassy plays an active role in promoting Norwegian business and investment in the UAE. We had around 16 companies as part of the Norwegian pavilion at Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) last year, and even more present through local partners. This year, we would like to increase Norwegian presence even further.
Given the currently depressed state of the global petroleum industry, what opportunities do you see for oil industry investors today, both from the perspective of Norwegian nationals looking to do business in the UAE and vice versa?
The oil and gas sector in the UAE remains incredibly interesting, as the UAE government still has big plans for further development. This country is seeing some of the largest oil and gas investments in the world. There has been some slowdown, undoubtedly, but those are mainly white elephant projects and all the productive projects with realistic investment and completion time frames will be delivered. Competition has increased because the rest of the world is looking at this region for investment but this is just a testament to how much potential there is here.
Vice versa, if the UAE examines Norway’s experience, they will see that we leveraged foreign technology and capital in order to not just build our own industry but also to develop Norwegian companies into serious global oil and gas actors. The goal was always for Norwegian companies to expand overseas. The UAE is beginning to work on a slow expansion outside the country, with some UAE petroleum interests, notably Mubadala Development Company, buying shares in other companies. This is a very good start.
The Norwegian offshore sector is still a very promising investment. While investment levels are expected to decrease in the next couple of years, this is only a short-term reflection of current market conditions. The Norwegian continental shelf (NCS) is estimated to hold the equivalent of 14.2 billion tons of oil, of which less than 50 percent has been developed, so there are still considerable resources there. New concessions are being granted each year. In addition, Norway has the perk of having an incredibly stable, predictable and peaceful business environment. For a country like the UAE, the Norwegian petroleum sector can be a very interesting means of diversifying its oil and gas portfolio.
What are your hopes for the trajectory of Norwegian and Emirati energy collaboration over the next few years?
My vision is to expand the existing areas of economic cooperation even further because there are great opportunities still in the industry. While the industry is a bit depressed and I will not pretend to be an expert on oil prices, it seems that the consensus among industry experts is that the oil prices one and a half year ago were too high and the current prices are too low, with the right equilibrium being somewhere in the middle. The estimate is that oil prices will rise to USD 40 per barrel or more by the end of this year and increase slowly to USD 50 or 60 over the next few years. At that level, there are still many fields that are economically viable.
Notwithstanding the increasing awareness surrounding climate change and pressure to switch to green technology, I think it is unavoidable that petroleum will still be a major – probably the major – energy resource for the upcoming few decades. Even now, the investment horizon in the petroleum sector is long. Industry actors need a long-term perspective; the industry is not moribund yet.
However, oil and gas, while important, will not be able to supply all of the predicted increase in future energy demand – most of the increase in global energy demand will have to be met by renewable energy. For this reason, I am very keen to promote a parallel track of energy resource development and I hope this will form a significant aspect of bilateral cooperation in the upcoming years. My perspective is that it is only natural for oil and gas companies to invest in renewables as well, as there are many complementarities and synergies between the two sectors. As an example, Statoil has devoted a considerable part of their business to renewable energy and many International Oil Companies (IOCs) now have a renewables division.
For this reason, another new area in which I am hoping to increase bilateral collaboration is renewables. This is a sector that Norway has developed for a number of years now and the UAE has recently begun to channel significant investment into it. Masdar City is the UAE’s flagship sustainable energy project and there are many interesting projects being undertaken there. In fact, we have recently opened a Nordic incubator at Masdar Institute, with the help of Innovation Norway, the Norwegian investment promotion agency.
What final advice do you have for Norwegian and foreign investors looking at the UAE as an investment location?
The core strength of the UAE is its stability, which stands out as even more remarkable when you consider the overall fragility of the Middle East. They have maintained a very open and fairly transparent business environment, and that has served them well. In terms of foreign investors, my advice is to commit to the region. To succeed, foreign companies need to establish a long-term presence here; it can be expensive at the start but it is absolutely necessary. The UAE and the Middle East in general is not a place for instant returns, as it is necessary to understand the cultural and business mentalities of the region. But any company willing to commit the requisite time and resources will see that there are great opportunities and great rewards to be reaped here.