This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L OSLO 000146

SIPDIS
STATE FOR EUR/NB RDALLAND, EB/ESC SGALLOGLY, RGARVERICK, FDOWDY
DOC FOR 4212 MAC/EUR/OEURA
DOE FOR S-3 GBISCONTI, PI FOR DCONOVER, JBRODMAN, EROSSI, FE FOR JSWIFT, JSLUTZ; LEKIMOFF

E.O. 12958: DECL: 02/13/2016
TAGS: EPET ENRG ECON PREL RS NO
SUBJECT: NORSK HYDRO CEO URGES GREATER U.S. ATTENTION TO HIGH NORTH ENERGY, RUSSIAN ENERGY/GAS MARKET DESIGNS

Classified By: Ambassador Benson K. Whitney. Reasons 1.4 (b), (d). 

Summary ------- 

¶1. (C) Norsk Hydro CEO Eivind Reiten told the Ambassador in an introductory call on February 8 that the United States appeared disinterested in High North energy and advised that we pay greater attention. Reiten also urged that we track closely Russias long-term strategic designs for the future global market in natural gas, citing Moscows efforts to control piped gas to Europe and the Black Sea regions gas supply networks and to call the shots on marketing Shtokman LNG. Reiten cited the risks of developing the "new frontier" in the High North -- that the industry does not find enough petroleum, political developments freeze companies out of parts of the region, or oil spills undermine public confidence --but said it would be a "disaster" if ten years pass and no real progress is made in exploiting the regions resources. Post agrees with Reiten that the United States should engage actively on High North energy -- not to placate the Norwegians, but because developing the Barents energy potential is clearly in our energy security interest and that of our European allies. End summary. 

High North Energy: U.S. Should Pay Attention --------------------------------------------- - 

¶2. (C) Norsk Hydro CEO Eivind Reiten told the Ambassador candidly February 8 that Norwegian policy makers and petroleum industry leaders did not believe that High North energy issues were "high up on Washingtons agenda." Reiten contrasted the perceived U.S. disinterest with the attitude of leading European governments, who were enthusiastically engaging on High North energy issues. The Ambassador assured Reiten that High North energy was an area of growing strategic interest for the United States. To turn Norwegians attitudes around, advised Reiten, Washington would have to visibly demonstrate more interest in High North energy developments. 

Russias Global Gas Strategy also Demands Attention --------------------------------------------- ------- 

¶3. (C) Reitens advice was given in a friendly and helpful vein. He thought U.S. interests would be well served by greater attention to High North energy, particularly the Russian angles. He said that it was clear from Hydros dealings with the Russians that they were taking a long-term, strategic view of global energy markets, particularly in natural gas. Moscows actions reflected a pattern, an effort to shape the future development of the world gas market "model" over the "very long-term" to advance its political and commercial interests. 

¶4. (C) As examples, Reiten cited Gazproms insistence that it control where gas from the Shtokman project was marketed, a strong grip on piped gas to Europe, a persistent effort to get a foothold in the Norwegian Continental Shelf (i.e. in the Snoehvit and Ormen Lange gas projects), and efforts to control gas supply networks in the Black Sea region. Reiten said such moves were part of a concerted Russian strategy and was "surprised" the U.S. did not appear to be paying closer attention. He hoped that having an American petroleum major in Russias Shtokman natural gas project would help Washington realize the importance of the issue and place offshore Barents energy on the U.S.-Russian energy dialogue agenda. 

High North Energy: A Risky New Frontier ---------------------------------------- 

¶5. (C) Calling High North energy a "new frontier," Reiten said the petroleum industry had to go there to meet future global energy demand. He noted the industry was "already there" in certain areas, like Alaska and Siberia, but would have to push gradually to new, High North seabed acreage. Hydro was actively positioning itself in the High North, bidding on new Barents acreage in Norways 19th petroleum 
concessions round, drilling a new wildcat well with Statoil, and fighting for a stake in Russias Shtokman field. In ten years, Hydro hoped to have operations on both the Norwegian and Russian sides of the Barents. Norway needed to fight for its national interests in the High North, particularly as the Russians now appear determined to go forward with Shtokman. Reiten said it would be a "disaster" if ten years pass and nothing happens to develop the Barents. 

¶6. (SBU) Summarizing his remarks at the exclusive Sanderstolen gathering of world petroleum industry officials and CEOs the prior week, Reiten cited three main risks for Barents development. First and foremost, that "we dont find anything," causing a loss of faith in the regions potential. Reiten noted that of more than 60 wells drilled in the Norwegian Barents, only two have resulted in commercial finds. (Note: Reiten was referring to Statoils Snoehvit natural gas field and a recent petroleum strike by Italys ENI in the nearby "Goliat" field. End note.) 

¶7. (SBU) Secondly, cross-border and political risks could keep some areas off-limits. Failure to demarcate the Norwegian-Russian maritime border would keep acreage in the disputed zone closed. On the Norwegian side, governmental restrictions could preclude industry access to protect fisheries and the environment. On the Russian side, national control of energy assets could freeze out foreign companies. 

¶8. (SBU) Thirdly, industry "misconduct," e.g. a major oil spill or well blow-out, could undermine public confidence in the industrys ability to develop the region responsibly and undercut policy makers who favor opening additional acreage. Reiten, noting that tanker traffic had grown "fifty times over the last five years" due to rising Russian oil shipments, thought a tanker spill presented the greatest risk. It was important that the industry leave "no footprint" to build public confidence. "The green to red traffic light sensors are very sensitive up there," said Reiten. 

Comment: The U.S. Stake in High North Energy --------------------------------------------- -- 

¶9. (C) This is not the first time we have heard that the U.S. does not appear particularly interested in High North energy. We should be. Not because the Norwegians want us to be, but because we have important interests at stake. Statoils Snoehvit project will begin supplying LNG to American and European customers next year and could, if expansion plans are realized, satisfy more than ten percent of U.S. LNG needs in a decade. Shtokman LNG would boost the percentage of U.S. supplies from the Barents region significantly. On the oil side of the equation, ENIs recent commercially viable strike off Hammerfest has drawn increasing attention to the Barents potential as a source of crude. There is probably no more stable and reliable major petroleum supplier than Norway, and it is clearly in the energy security interests of the United States and its European allies to encourage the highest possible rates of production and exploration here. 

¶10. (C) The policy choices we make today will help shape how the regions resources are developed, or not developed, over the next twenty years. We need to develop a vision of what the Barents should look like in twenty years -- significant oil and gas assets in production on both sides of the Norwegian-Russian median line, U.S. majors holding stakes in those assets, a border demarcation that would open up an area larger than the North Seas current production zone to exploitation, new LNG and crude supplies flowing to the United States and its European allies -- and work towards its realization. 

WHITNEY