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A tough reality for the industry

November 23, 2015, 11:06 CET

In his speech to the Norwegian Prime Minister and other guests at the annual Autumn Conference, Sætre emphasized the fact that the energy world is changing and the oil and gas industry is currently facing a tough reality, as global upstream investments are estimated to fall by 20% in 2015.

But oil and gas will continue to play an important role in the future energy mix.

"We know that energy demand is growing. We also know that renewable energy will have to meet most – if not all – of this increased demand. However, oil and gas will remain critically important energy resources. Even in a 2 degree world we need oil and gas roughly at today’s levels in 2040," Sætre says.

The Statoil CEO referred to the signals from the European Commission’s state of the energy union and the UK energy secretary’s speech on UK power generation policy last week.

"I was encouraged by the signals on the important role of gas," Sætre says.

Tenth time

In cooperation with the Norwegian Ministry of Petroleum and Energy and the International Energy Agency (IEA), Statoil today hosted the Autumn Conference in Oslo for the tenth time.

The Norwegian Prime Minister Erna Solberg and Anita Marangoly George, Senior Director of the World Bank Group’s Global Practice on Energy and Extractive Industries, were among the speakers.

In advance of the COP21 climate summit in Paris, Sætre emphasized the action needed from policy-makers to set the course through effective policies and from the business doing most of the job in order to solve the global climate challenges; to meet the increased demand for energy and at the same time reduce emissions.

So far the commitments before COP21 in Paris are not sufficient for the world to reach a 2 degree target.

"But there are weak signals that give cause for optimism. On the political side there is stronger willingness and commitment from some of the big players, including US and China. On the business side I see a growing recognition that the time has come to act and engage," Sætre says.

Carbon efficiency in oil and gas production, technology development and innovation and support to effective policies and regulations stand out as the industry’s best way to contribute.

Sætre pointed on that global energy trends represent both challenges, risks and opportunities. Energy demand is growing and emissions must be reduced. This will lead to large shifts in energy use and production. At the same time lower oil and gas prices are causing a rebalancing of supply and demand, putting an increasing premium on being a low-cost producer.

Turning point

"Combined this dynamic will create a turning point for the industry. The companies and countries that show they can successfully tackle these challenges will be the new winners. Statoil’s response is to capture the opportunities and actively shape the future of energy," Sætre says.

Based on this the Statoil CEO has set three clear priorities for the company going forward.

"First, we need to be competitive at all times and create a company that can operate profitably even in today’s commodity environment. Second, Statoil will set an example for how the oil and gas industry must transform. Our industry was unsustainable at 100 dollar oil."

"That’s why we need to embrace simplification and standardization, but also collaborate and share solutions to solve joint problems. And thirdly, I want Statoil to be an energy provider for a low-carbon future. Oil and gas will remain a critically important part of this future. We want to be the world’s most carbon-efficient producer of oil and gas and we will increasingly use our competence in new areas", Sætre says.

In his presentation at the Autumn Conference executive director of the IEA Fatih Birol highlighted the key findings of the latest World Energy Outlook (WEO), one of the most quoted of global energy scenario analyses.

The global perspectives in this year’s WEO, which was launched on 10 November, sees clear signs that the energy transition is underway, but emphasizes that strong direction is needed from the Paris climate summit.

The climate pledges submitted in advance of COP21 are rich in commitments on renewables and energy efficiency, and this is reflected in the WEO-2015 finding that renewables are set to become the leading source of new energy supply from now to 2040, according to the report.

The net result of the changes seen in the WEO-2015 central scenario is that the growth in energy-related emissions slows dramatically, but the emissions trajectory implies a long-term temperature increase of 2.7 °C by 2100. A major course correction is still required to achieve the world's agreed climate goal, the report says.