From: <a href="http://www.aftenposten.no/spesial/wikileaksdokumenter/article3960285.ece">Aftenposten</a><br>
Date: 13.02.2006: 

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

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
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