VZCZCXRO6374
PP RUEHIK
DE RUEHNY #0791/01 3621201
ZNR UUUUU ZZH
P 281201Z DEC 09
FM AMEMBASSY OSLO
TO RUEHC/SECSTATE WASHDC PRIORITY 8064
INFO RHMFIUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHGB/AMEMBASSY BAGHDAD PRIORITY 0114

UNCLAS SECTION 01 OF 02 OSLO 000791 
 
STATE FOR EEB - AGREENSTEIN,CBACKEMEYER, NEA/IR - RWADHWANI, EUR/NB 
 
SENSITIVE, SIPDIS 
 
¶E. O. 12958:  N/A 
TAGS: EPET ENRG EPET ETTC PREL IR NO RU
SUBJECT:  Statoil Chief Discusses Global Investments with 
Ambassador 
 
REF: (A) STATE 121808 (B) OSLO 741 
(C)Backemeyer-Greenstein/Sirotic Email 12/18/09 
 
OSLO 00000791  001.2 OF 002 
 
 
(U) This document is sensitive but unclassified.  Please protect 
accordingly. 
 
¶1. (SBU) Summary:  Statoil Chief Executive Officer Helge Lund 
provided the Ambassador with an overview of the company's 
investments in the United States, Russia, Iraq, Iran and Norway in a 
meeting on December 18.  He stressed Statoil's transparency with the 
USG with respect to past investments in Iran and reiterated the 
company's commitment to abstain from new investments there.  Lund 
also shared his views on the environmental benefits of natural gas 
use and suggested that carbon capture and storage (CCS) should focus 
on natural gas rather than coal.  End Summary. 
 
¶2. (U) In a meeting with the Ambassador on December 18, Statoil CEO 
Helge Lund offered a tour d'horizon of the majority state-owned 
firm's investments and strategy in several countries, as well as his 
views on domestic energy policy in Norway. 
 
¶3. (SBU) Carbon Capture and Storage:  Lund opened by discussing the 
need to maintain a balance between pursuing "green" technologies and 
increasing shareholder value, while positioning the company for a 
world with higher future carbon prices.  He said he was looking to 
the United States to help solve problems with carbon capture and 
storage (CCS) technology.  The Ambassador noted Secretary Chu's 
recent visit to the Test Center Mongstad (TCM) CCS site, but stated 
that the United States had not committed to any specific path on the 
CCS issue.  Lund opined that clean coal is not a realistic objective 
and that CCS would only work with natural gas.  The environmental 
benefits of focusing on greater use of natural gas have been 
underestimated.  However, he said he anticipated potential 
environmental objections to the exploitation of shale gas. 
 
¶4. (U) U.S. Investments:  Statoil has invested USD 10 billion in the 
United States in the last five to six years.  Lund commented that 
Statoil had a good partnership with Chesapeake, a U.S. firm that it 
invested in several years ago.  Recent increases in U.S. gas 
supplies have implications for Europe's energy balance, since more 
liquefied natural gas (LNG) will be available for European 
consumers.  This will reduce the continent's dependence on Russian 
supplies.  Lund suggested that the U.S. might even be in a position 
to export gas in the future.  He also mentioned a feasibility study 
for wind power underway with the University of Maine.  Lund 
emphasized his desire to maintain dialogue with the USG. 
 
¶5. (SBU) Iraq:  Lund said that Statoil needed its "play" in Iraq, if 
only in partnership with another firm (Lukoil).  He expressed some 
concern about both the security risks of working in Iraq and the 
political risks associated with upcoming elections, though he 
reported that visiting Foreign Minister Zebari indicated the 
elections would not threaten energy contracts.  Lund characterized 
Iraq's bidding process as well-organized and transparent.  He opined 
that forecasts that Iraq will manage to ramp up oil production from 
2-3 million barrels per day (mbpd) to 12 mpbd in seven years were 
unrealistically optimistic. 
 
¶6. (SBU) Iran:  The Ambassador asked Lund about Statoil's 
investments in Iran.  Lund stressed that the company held to its 
2008 commitment not to undertake new investments in the country and 
was committed to sharing information with relevant authorities, 
including the USG, on its activities.  Regarding South Pars 6, 7 and 
8, Statoil has completed the project and is now being repaid for its 
investment.  He noted there was some inaccurate information in the 
public sphere about the size of Statoil's investments in Iran and 
was concerned that accurate information be made available to us. 
Lund told us Statoil was willing to provide additional information 
if needed.  Note:  Earlier that day, Statoil executive Gunnar 
Myrvang called Poleconoff on this issue.  He noted that a 
Congressional Research Service report cited investments of USD 2.65 
billion in South Pars 6,7, and 8 but said Statoil estimates its 
spending on this project totaled USD 700 million plus or minus USD 
50 million (ref C).  End Note.  Noting that Statoil was doing all it 
could to be transparent and to maintain a dialogue with the USG on 
Iran, Lund said he hoped that Statoil would not be singled out for 
sanctions.  He added that sanctions on Iran would not be effective 
unless Russia and China participated in them. 
 
¶7. (SBU) Norway:  Lund pointed to declining oil and gas production 
as a large challenge for the country.  He asserted that over 70 
percent of Storting (Parliament) MPs would support opening the 
Lofoten/Vesteralen offshore area to exploration and development over 
the objections of environmentalists and the fishing industry if the 
issue were to come to a vote.  He opined that the governing Labor 
Party could open the region to the energy industry if it turned to 
opposition parties for support on this specific measure.  Note: 
 
OSLO 00000791  002.2 OF 002 
 
 
Junior coalition partners the Socialist Left Party and the Center 
Party are strongly opposed to opening the region to energy 
development.  End Note. 
 
¶8. (SBU) Russia:  Lund told the Ambassador that there are huge (3700 
billion cubic meters) gas reserves at the offshore Shtokman field 
and that the necessary technology is available to develop the field, 
but the project faces a number of serious challenges, including: 
lack of local infrastructure combined with local content rules; risk 
of low gas prices continuing into the future, thanks to the impact 
of shale gas discoveries; and overall political risk.  Lund said he 
was very worried about corruption and opined that it is worsening. 
He also observed that dealing with Gazprom, Statoil's partner in 
Shtokman, was essentially like dealing with the Russian Government, 
while dealing with Lukoil, Statoil's Iraq partner, was totally 
different.  The Russian economy has been hit by adverse developments 
in both gas export volume (down 25 to 30 percent) and reduced sales 
prices. 
WHITE