Around 60,000 people tied to or challenging the oil industry were once again meeting in Stavanger, Norway’s west coast oil capital, for the Offshore Northern Seas conference and exhibition this week. The event has attracted more than a thousand companies from 100 different countries, along with royalty, government officials and Tesla founder Elon Musk, and this year they’ll be tackling the major changes facing the business that fuels Norway’s economy.
Queen Sonja was on hand for the opening of the huge event Monday morning, and Prime Minister Erna Solberg was speaking along with Helge Lund, president and chief executive of Statoil, Norway’s biggest oil company. Maria van der Hoeven, executive director of the International Energy Agency, was also addressing the crowd, along with the others, about the changes confronting the industry because of climate and global environmental concerns and new technology.
Elon Musk, the celebrity founder of both PayPal and the Tesla electric cars that have become wildly popular in Norway, arrived predictably enough in a black Tesla himself and was also on the opening agenda of speakers Monday morning. His electric cars have made highly visible changes in the automobile market in the Oslo area, for example, and make conventional cars that rely on fossil fuels seem like fossils themselves. While Musk is viewed as one of the biggest challengers to the oil industry, though, he had no plans for spoiling the party in Stavanger: “We will always need oil,” he told newspaper Dagens Næringsliv (DN) on Monday.
Musk was nonetheless in Stavanger to challenge industry players. It’s not only the vast improvements in electric car technology and battery capacity that make cars like the Tesla a serious competitor to petroleum-driven cars. Musk thinks oil prices will rise again, making fuel more expensive, while oil reserves will be come more difficult and expensive to extract. In general, though, he downplays the threat his popular Tesla cars pose to the industry. While Norway has emerged as a major market for them, because of tax incentives and an affluent population, Musk notes that they only make up a tiny percentage of the global car park. He doesn’t think the oil industry’s revenues will be seriously threatened during the next 20 years.
“Let me put it this way: Everyone in this (oil) industry will be retired long before (electric car production) poses a problem from a revenue standpoint,” Musk said.
Oil executives remain worried that their costs for everything from oil exploration to production keep rising while oil prices have remained relatively stable for the past four years. The revolution within shale gas and oil in the US has also upset gas market prospects in Europe, not least for Statoil, while new political tension with Russia and the ongoing bloody unrest in the Middle East pose constant challenges.
Oil analysts like Thina Margrethe Saltvedt of Nordea Markets contend that all the changes facing the industry are a “necessary wake-up call” for the industry. She told newspaper Aftenposten that the oil companies “must understand that the transition to a more environmentally friendly society has begun and will keep going only in that direction.” She sees a need for a major restructuring of the business, prodded by less oil and coal production in favour of more natural gas, wind and solar energy. Environmental advocates have long argued that engineering expertise from the oil industry can and should be transferred over to alternative forms of energy.
Tord Lien, Norway’s relatively new oil and energy minister from the Progress Party, is acutely aware that the biggest issue facing Norway’s petroleum industry is its high cost level. He thinks the industry needs to stop blaming state authorities, however, and reexamine their own organizations.
“It’s first and foremost the companies themselves that have the main responsibility for keeping costs down,” Lien told newspaper Dagsavisen. And he cautioned that cost-cutting can’t come at the expense of safety or the environment. He also thinks the oil companies must need to be more proactive in meeting new demands for lower carbon emissions, but he doesn’t go along with those who claim much of Norway’s oil should remain under the seabed and not be extracted. “That’s extremely costly, and we’re talking about 250,000 jobs tied to the industry and how we finance our welfare state,” Lien said.
That’s also why Musk doesn’t think the oil industry needs to be overly worried, rather just more willing to change. “The party will go on for a long time,” he told DN with a laugh.