US embassy cable - 06OSLO146 (original version)

NORSK HYDRO CEO URGES GREATER U.S. ATTENTION TO HIGH NORTH ENERGY, RUSSIAN ENERGY/GAS MARKET DESIGNS (original version)

Identifier: 06OSLO146
Wikileaks: View 06OSLO146 at Wikileaks.org
Origin: Embassy Oslo
Created: 2006-02-13 14:03:00
Classification: CONFIDENTIAL
Tags: EPET ENRG ECON PREL RS NO
Redacted: This cable was redacted by Wikileaks. [Show redacted version] [Compare redacted and unredacted version]
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 Russia's long-term strategic designs for the future 
global market in natural gas, citing Moscow's efforts to 
control piped gas to Europe and the Black Sea region's 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 region's 
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 Washington's 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 
Norwegian's attitudes around, advised Reiten, Washington 
would have to visibly demonstrate more interest in High North 
energy developments. 
 
Russia's Global Gas Strategy also Demands Attention 
--------------------------------------------- ------- 
 
3.  (C) Reiten's 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 Hydro's 
dealings with the Russians that they were taking a long-term, 
strategic view of global energy markets, particularly in 
natural gas.  Moscow's 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 Gazprom's 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 Russia's 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 Norway's 19th petroleum 
 
 
concessions round, drilling a new wildcat well with Statoil, 
and fighting for a stake in Russia's 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 don't find 
anything," causing a loss of faith in the region's 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 Statoil's Snoehvit 
natural gas field and a recent petroleum strike by Italy's 
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 industry's 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. 
Statoil's 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, ENI's 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 region's 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 Sea's current production zone to 
exploitation, new LNG and crude supplies flowing to the 
United States and its European allies -- and work towards its 
realization. 
 
Visit Oslo's Classified website: 
http://www.state.sgov.gov/p/eur/oslo/index.cf m 
 
WHITNEY 
 
 
NNNN 

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