Tord Lien – Minister of Petroleum and Energy, Norway
In an exclusive interview at the Economist Energy Summit 2016, Tord Lien, Norwegian Minister of Petroleum and Energy, discusses his country’s efforts to make the oil and gas industry more cost-efficient and Norway’s future role in a world increasingly looking to renewables.
How has the Norwegian hydrocarbons industry been faring during the current period of ongoing low oil prices?
“The Norwegian hydrocarbons industry has always displayed a great propensity for technological innovation … It should therefore come as no surprise that we are leading the way in terms of identifying new efficiency gains.”
All in all, I think we have proved to be very resilient in dealing with this situation. Let’s not forget that 2014 represented a period of record high investments on the Norwegian continent shelf that would have had to be corrected downwards regardless of any drop in oil price that the world has experienced over the past couple of years. So far the local industry has lost approximately 40,000 jobs, but the rate of layoffs looks to have stabilized and we still have around 210,000 jobs remaining. Moreover, Norwegian companies have been making a great deal of progress in bringing down the cost of their operations.
Tell us about the headway being made in making the local industry more cost-efficient
We now possess fields on the Norwegian continental shelf that can produce as much as 70 per cent of the reserves and we are taking about an average recovery rate of close to 50 per cent. This is a quite an achievement and represents quite a difference from the period of the oil price super-cycle when there was considerably more slack in the system. The Norwegian hydrocarbons industry has always displayed a great propensity for technological innovation with many of our products and techniques being adopted and exported around the world. It should therefore come as no surprise that we are leading the way in terms of identifying new efficiency gains.
In many oil and gas markets, E&P companies have been endeavoring to reduce their capital expenditure and putting new development projects on hold. Locally, what have been the implications of the current price environment on companies’ willingness to engage in exploration activity?
In the Norwegian theatre of operations, activities have continued despite the oil price plunge. This autumn alone, the Ministry received four pre-exploration plans for approval with a fifth soon to be on the way. Furthermore, in mid-December, we will be launching our 2017 licensing round for mature areas allowing E&P players access to up to 87 new offshore exploration blocks: 53 in the Arctic Barents Sea and 34 in the Norwegian Sea. Known as ‘licensing of pre-defined areas,’ this particular round will award acreage close to existing developments and discoveries, thus allowing firms to tap in to new resources while leveraging infrastructure that is already in place or undergoing planning. Awarding new acreage for exploration remains a critical plank in the government’s petroleum policy and an important tool in resource management. Our firm belief is that the 2017 round will deliver activity and value creation to our oceans.
The oil industry remains a crucial source of investment for the Norwegian economy with an estimated 143 billion Norwegian crowns ($16.96 billion) to be spent next year. Is there not a risk, however, that the country will find itself on the wrong side of history as the world starts to look beyond fossil fuels and re-orientate towards renewables?
Firstly, I would contest those that claim that the days of fossil fuels are numbered. Even if oil demand reaches a plateau, there is still a huge need for new investments in oil and gas fields to make up for a natural decline in existing producing fields. On a global level 1 in 5 people still lack ready and reliable access to electricity. We thus must adopt a realistic approach in recognition of the fact that oil and gas will be the backbone for decades ahead.
Norway’s has a vital current and future role to play as a reliable and affordable partner to Europe for natural gas. Last year, we produced and exported some 150 billion cubic meters currently covering some 25% of gas consumption in continental Europe making us a formidable competitor to any other suppliers. So far, we over only produced one third of our total gas resource and our calculations tell us that we can continue producing for another two decades before we’ve reached the second third.
Finally, let’s not forget that we constitute a reliable, environmentally conscious partner that doesn’t just export energy to Europe, but can also store it very effectively. For instance, our hydropower reservoir capacity constitutes half of Europe’s total. Our vision is ultimately to affirm our status as the “green battery” of Europe. The EU will be redesigning its electricity market over the next years to reflect a growing share of renewables in the system and we consider ourselves to be ideally placed to stabilize and balance out our neighbors’ networks at times when the sun doesn’t shine and the wind doesn’t blow, and thus when Europe requires huge volumes fast.