1. POLITICS AND LAW – ENERGY AND ENVIRONMENT IN THE FAR NORTH Who needs what, when and how? 150th Anniversary Symposium Norwegian Academy of Sciences January 25, 2007 Øystein Noreng

2. Arctic Energy Large petroleum (oil and natural gas) potential, according to USGS perhaps 25 per cent of remaining, undiscovered reserves, possibly more natural gas than oil Only five states involved: Canada, Denmark, Norway, Russia and the United States Border disputes: Canada-Denmark, Canada- USA, Norway-Russia Hurdles: high costs, need for new technology, and high environmental risks affecting fisheries

3. The Key Stakeholders Norway Russian Federation European Union United States of America Canada Denmark (Greenland) Petroleum companies Fishermen

4. The Stakes Oil and gas supplies Revenues Technology development Business opportunities Environment Fish stocks, food supplies High risks on all accounts

5. The International Context High oil prices since 2004, largely driven by political risk in the Middle East Due to US dollar depreciation, oil price increase more moderate in Europe than in the USA Oil demand still growing globally, indicates that prices are not too high for the market Significant changes in international financial balances and economic power relations Large financial surpluses in OPEC, Norway and Russia, large US trade deficit

6. Relative shares of world total 2005

7. Energy use and GDP per capita 2005

8. Energy use per unit of GDP 2005

9. Petroleum Balance Million tonnes of oil equivalent 2005

10. Oil Prices and Exchange Rates Brent spot

11. Current Account Balances Billion USD

12. Current Account Balances Per cent of GDP

13. US Petroleum Issues High oil consumption, little political support for efficiency measures and taxes Declining Canadian natural gas output promotes overseas imports Petroleum key item on large and rising trade deficit, weakening the position of the US dollar High household indebtedness limit potential for interest rate rises Need for rising oil and gas supplies to the world markets to lower prices, offsetting demand increase Need for continued oil pricing and trading in US dollars

14. US Oil Imports 2005

15. US Natural Gas Imports 2005

16. Russian Petroleum Issues Huge potential, known and unexplored areas Objective to be a great power through energy and capital Inefficient use of energy, conservation potential Inefficient energy industry, volume potential Relations between investors and government unsettled, no petroleum property law, no petroleum tax law Huge financial surplus weakens need for reforms and investment Interest in euro oil pricing and trading

17. EU Petroleum Issues Large and rising petroleum importer exposed to market supply and price risks Difficult balancing between secure supplies and moderate prices Does not want higher dependence on Russian supplies, but alternatives are risky Competition with the USA (and China) over oil, natural gas and markets in the Middle East, and North and West Africa Norway a key supplier and partner Interest in euro oil pricing and trading

18. EU-25 Oil Imports 2005

19. EU-25 Natural Gas Imports 2005

20. The Needs Norway: activity to offset decline further south Russia: no activity for several years Canada: some activity Denmark: activity to offset decline EU: activity to open area USA: volumes to stabilise the oil market and reduce dependence on the Middle East Oil companies: equity oil and gas Fishermen: controlled activity

21. The Time Horizons Norway: gradual development Russia: development later Canada: gradual development Denmark: gradual development EU: gradual development USA: quick development Oil companies: gradual investment and technology development Fishermen: safeguarding fish stocks for ever

22. The Methods Norway: cautious allocation of licenses, national companies Russia: deferring decisions Canada: limited opening Denmark: limited opening EU: encouraging cooperation USA: encouraging development Oil companies: preparing technology Fishermen: awaiting decisions

23. Summing Up Key stakeholders, including Norway and Russia, have no need to rush Arctic petroleum development Canada and Denmark may have more interest in an early start EU needs new import sources over time USA may need new import sources quickly Petroleum industry interest is to access a new province, but technological and economic risks are high The fishermen’s interest is strict environmental protection and a modest pace; their livelihood and our food supplies are at risk

24. Norway and the Far North Developing the Arctic to a new petroleum province will require lasting high prices (>$50/bl.) Technology development and infrastructure investment will take many years Technical, commercial and environmental risks are high By active involvement, Norway can set technical and environmental standards Arctic petroleum activities potentially a large market for the Norwegian supply industry In the Arctic, Norway needs good relations with the EU, Russia and the USA, and between them!