NORWAY: June 5, 2008


OSLO - The oil industry stands at a crossroads where the need for more energy meets calls to tackle climate change, the boss of Norwegian oil and gas producer StatoilHydro told Reuters on Wednesday.


Chief Executive Helge Lund said the way forward should rely on creating a global, market-set price for carbon emissions, especially since tapping new, unconventional energy sources such as oil sands was likely to boost the industry's carbon footprint.

"We are at a crossroads and the challenge is double because many of the more difficult resources are not only more costly to develop but also have higher CO2 emissions," Lund said.

"I am convinced that the most effective way of tackling the climate issue is to establish a common price for CO2 emissions and the market will find the most efficient solution quickly."

He said the climate debate could not "circumvent" the fact that most of the growth in energy demand over the next decades must be met by oil and gas, including unconventional resources that are more energy-intensive to exploit.

"The critical challenge is not so much whether these resources will be developed, but whether we as an industry can develop them as efficiently as possible and jointly find solutions to the CO2 issue," he said.

StatoilHydro, a company worth $120 billion that produces about 1.7 million barrels of oil equivalent per day off Norway and abroad, has a Canadian oil sands venture as well as heavy oil projects in Venezuela, Brazil and Britain.

"We now have the most energy-efficient and CO2-efficient production of oil and gas in the world in the North Sea and StatoilHydro in particular can also use that competence and technology elsewhere," said Lund.


NATIONAL, INTERNATIONAL PLAYER

Lund said the sharp rise of oil prices over the past years has made resource-rich countries more confident and made it more difficult to access new resources. Here, the partly privatised StatoilHydro, still 62.5 percent state-owned, sees benefits from being part national oil company and part international major.

"We maybe understand in a more detailed way the issues and the opportunities that national governments around the world are struggling with," Lund said. "So hopefully we can be a good partner in some of these areas."

He said, however, that international oil companies were needed to provide the technology and project execution, working in tandem with national oil groups and oil service contractors.

"Those who will be most successful are those who can collaborate and find new ways of working to respond to the challenges we are seeing," Lund said.

Lund said the company was working to boost efficiency and develop environmental technologies, including capture and storage of carbon dioxide (CO2), known also as sequestration.

"The oil sands business is a case in point where we will try to engage with the industrial community in Canada to see how we can contribute to increase efficiency ... and also look at long-term solutions for CO2 sequestration and storage," he said.

"But it is important to look at this in a global perspective. No single company can solve this issue. We have to do it in a global framework and everyone has to participate."

The company is also working to develop offshore wind turbines to supply clean power to installations and Lund said the group may get a bigger electricity profile in the future.

"I won't rule out that through our engagement in renewables that we can also build a position in electricity, but for the foreseeable future this will not be a big part of our operations," said Lund.

(Editing by Brian Moss)


Story by Wojciech Moskwa and John Acher


REUTERS NEWS SERVICE