DECC Chris Barton Remarks September 2010

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Remarks by Mr Chris Barton, Head of Energy Security, UK Department of Energy & Climate Change, at a seminar "Connecting the Norwegian and British Green Energy Revolutions," in September 2010. Mr Barton outlines the strength and depth of the energy links between the UK and Norway and the potential for future new-energy business opportunities.

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DECC Chris Barton Remarks September 2010

  1. 1. Remarks by Christopher Barton, Head of International Energy Security, DECC, at aseminar "Connecting the British and Norwegian Green Energy Revolutions," held inOslo on 21 September 2010 Norway is most important international partner in ensuring our energy security. I want to explain why. I lead the international energy security team in the UK’s Department of Energy and Climate Change. This is the department responsible within UK government for ensuring our energy security and action to tackle climate change at home and abroad. First, a bit of context. Like Norway, the UK has been enormously blessed by the oil and gas resources found in the North Sea. But unlike Norway, the decline in our N Sea production means we are now rapidly increasing in our dependency on imports to meet our energy needs – by 2020 we may be importing around 60% of our oil (compared to less than 10% today), and perhaps 70% of our gas (compared to around 30% today). We have no problem with imports. But global energy demand is rising; production can be limited for geological and investment reasons; supply can be disrupted due to market imperfections and political issues; and prices volatile. And of course we need also to tackle climate change. We therefore need to work to ensure our international energy security. Our approach is based round 4 pillars: o Encouraging investment in oil and gas production; o Promoting reliable energy supply – notably through efficient markets and strong bilateral relations; o Enhancing price stability; o Stimulating low carbon growth Norway is a key partner in each of these pillars.
  2. 2.  First, investment in oil and gas production. Global oil demand could rise by a quarter in the next 20 years, and gas demand by 40%. Investment to the tune of some $5trillion is required. Much of our international energy security work therefore focuses on encouraging other countries to adopt policies that support investment in the oil and gas production we need – be that through bilateral work (e.g. in Russia, Iraq, Nigeria, Turkmenistan) or through multilateral organisations (such as the Energy Charter Treaty or IEA). But we also need to maximise our own production, and that is where the focus of our work with Norway lies. We are fortunate to share the North Sea and its abundant reserves. Our close working has allowed successful joint development of some of the largest North Sea fields such as Frigg, Statfjord and Murchison. We have approved 9 new oil and gas projects under the 2005 Framework Agreement, with 2 of these projects being agreed in the past few months.• Also as our basins mature we must not overlook the opportunities still held within our producing fields. Typically with current practices and technologies we leave more than half the hydrocarbons behind, which suggests there is an enormous prize if we can improve on these rates. Our two countries are therefore now working together on the challenges of Enhanced Oil Recovery (EOR). And under the UK-Norway mentoring programme we are working together to address the skills and supply chain challenge.• We also need to work closely on meeting some of the new challenges that we face together. A stark example of this is the Gulf of Mexico oil spill. The UK and Norway have regulatory regimes for offshore drilling that are amongst the most robust in the world and the industry’s record in the North Sea is strong. We believe these are such that deep sea drilling can and should continue here safely. But there is no room for complacency and we will need to take account of the lessons learned as the investigations into this tragedy is carried forward. The UK and Norway have a similar interests in ensuring we all learn the right lessons from this.
  3. 3.  The second pillar of our work is to promote reliability of our energy supplies. Partly that’s about encourage efficient energy markets – e,g, through liberalisation of European energy markets, and promoting free trade more generally. But it’s also about strengthening bilateral links with key supply countries, where again Norway is key: well over 50% of our oil and gas imports are Norwegian. Perhaps paradoxically, let me point to the disruptions we faced this January as a mark of the success of our links. Norway played a major contribution when our gas demand reached record levels in early January. And when problems arose in Norwegian production, at no time did the UK face supply shortages. We have since agreed new processes to enhance our communication on supply developments. In a world where we will be importing increasing proportions of our energy needs, we are delighted that the main current and future source of those imports is such a trusted partner as Norway. That is not to say there are no issues. We have ongoing discussions about our regulatory system, conscious that we need to maintain a system that is producer-friendly. We also know we need to give clear messages about the security of our demand. Our legally binding targets to cut GHG emissions by 80% by 2050 will have profound implications on our energy mix, and we are still working through the implications of that. We are currently consulting on a range of potential scenarios for meeting those targets, and welcome input from our Norwegian colleagues. But already our work has made clear that our need for gas imports will rise in the near term, and remain significant into the longer term; and our need for oil imports is likely to be higher in 2050 than it is today. The third pillar of our strategy is to enhance price stability. Over the past couple of years we have seen dramatic swings in oil prices, nearing $150/barrel in mid 2008 only to fall precipitately below $40/barrel a few months later, and now hovering around $75. Such volatility damages consumers, damages investment and damages economic growth. It also damages the move to low carbon. On the other hand we clearly cannot control the price of oil, nor should we attempt to do so. Instead we see the focus of our policy around three stranding of:
  4. 4. o increasing transparency on oil and gas data, notably through the work of the IEF; o strengthening the dialogue between producers and consumers so that we can better understand and deal with pressures in the market, based on a new charter for the IEF and shared analysis of key outlooks and drivers – e.g. through joint OPEC and IEA work to underpin that dialogue; and o oversight of the financial markets and their interaction with energy markets.  In all this work UK and Norway are closely involved, notably through the IEF. The fourth and perhaps ultimate solution to our energy security needs is to promote low carbon growth. This is of course vital for tackling climate change; but it is also vital for reducing our exposure to the increasing risks of fossil fuel dependency, and offers many business opportunities as well. Our Prime Minister, David Cameron, on his second day of office, tasked my department with leading Whitehall to be the greenest government ever seen. I think that shows how high on the agenda we are. It means more renewables, more CCS, new nuclear and more energy efficiency. We need this both domestically and internationally. Once again, Norway is a key partner in this work: The North Sea is an ideal location for many low-carbon technologies and we want to see a massive expansion. The Carbon Trust have estimated we could need as much as £100bn of new investment in the UK offshore wind industry alone in the next 10-15 years. Norway is already a significant investor in the UK renewable sector, notably Statkraft’s and Statoil’s wind projects at Sheringham Shoal and Dogger Bank. This is on the back of very ambitious, legally binding targets for increasing renewable generation in the UK; strong financial incentives to do so; determined action to facilitate e.g. through the planning process; and active work to maximise the business and wider supply chain opportunities associated with it. And in due course we hope to see similar growth in the marine energy too.
  5. 5.  Developing our North Sea Grid interconnections is likely to be a key aspect of our renewable work. The UK and Norway have agreed to consult with industry on the framework needed to build a green electricity interconnection between our two countries. This could enable us to benefit from each others’ capacity and help deal with intermittency. We also see CCS as essential in mitigating climate change whilst maintaining energy security. The UK and Norway have co-funded the One North Sea basin taskforce study and are working with the Netherlands and Germany to look at the crucial role of the North Sea in CCS deployment in Europe. The UK and Norway are also working with others on the Near Zero Emissions Coal project, to develop and demonstrate CCS in China; and as part of the 4 Kingdoms’ initiative with Netherlands and Saudi to promote more general international CCS deployment.• So the UK and Norway have long been close allies, and our energy dialogue continues to strengthen and deepen – as do the associated business opportunities. Just last month our energy ministers signed a new North Sea Joint Ministerial Statement to set the framework for more and closer collaboration, and tonight’s event – for which I must reiterate my thanks to HMA Jane Owen and her team, as well as everyone attending here today – is another marker of that.• Thank you.

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