“The Arctic – Warming Up for Business” 

Ladies and Gentlemen, 
I am pleased to be here with you this morning and share with you my insights and vision on the Arctic and, in particular, the business opportunities that we see emerging as the ice cap recedes and economic activities increase in the region. 

I want to thank the Icelandic Arctic Chamber of Commerce, ETNA Legal Services and Price Water House Coopers for organising this timely event and also welcome dr. Michael Byers to Iceland. Last year, Iceland hosted numerous conferences and events relating to developments in the Arctic and I am pleased to start the New Year in a similar fashion. I sometimes say that we are, here in Iceland, sitting in the front row of witnessing climate change and its consequences – positive and negative. We can, therefore, offer the best seats and are centrally placed to host events on the Arctic.

I will be focusing on the economic aspects in my remarks but let me still, at the outset, underline that the changes in the Arctic are multifaceted and affect our societies in various ways – environmentally, socially, in terms of security and, indeed, economically. Let me also note that the environmental changes are occurring at an even faster pace than anticipated – the ice cap decreased by 900 thousand square kilometres between 2011 and 2012. That is nine times the territory of Iceland! And let me also say that these changes not only entail opportunities, but also challenges. This we always need to bear in mind although we may be focusing on the opportunities this morning.

My government has identified developments in the Arctic as a priority in our foreign policy. There is a broad consensus in Icelandic politics when it comes to the Arctic and my government´s ambition is to maintain and foster this cohesion and continue to build on, and develop, the principles that underpin the Arctic policy that was unanimously agreed to in Althingi in 2011.

We believe that a holistic approach is needed to address the opportunities and challenges in the Arctic. With this in mind, late last year, my government decided to establish a Committee of Ministers on Arctic Affairs, which I as Prime Minister preside over. The Committee, which in fact convened for the first time last week, will ensure the highest political attention and a co-ordinated implementation of Iceland´s Arctic policy. Hereby, a whole-of government approach is applied, cutting across the various dimensions and complexities that characterise developments in the Arctic. 

In addition, my government is also in the process of refining and developing some of Iceland´s Arctic policy aspects, including the prioritisation of financial contributions and further underpinning the important co-operation between the State and other actors, not least the industries and businesses. This is why the Icelandic Arctic Chamber of Commerce was established last year, and this is why Iceland is in the forefront internationally of preparing for a similar body, the Arctic Economic Council, amongst the Arctic nations. 

Ladies and Gentlemen,
Let me now focus my remarks on the economic and business opportunities in the Arctic. 

I believe the Arctic has enormous economic potentials. Yes, numbers, figures and estimates need to be taken with caution. However, it is beyond doubt that the region has huge untapped potentials when it comes to the extraction of oil and gas. Some estimates say at least 18% of the world´s undiscovered oil and 30% of gas. In addition, the region is deemed to be rich of valuable minerals - and we follow developments with our closest neighbour in the West, Greenland, with interest – but also fish, wood and hydro.

Moreover, alternative transportation routes are opening up, cutting distances by thousands of nautical miles to ever growing markets in the East and, hence, bringing North America, Europe and Asia closer together – geographically and commercially. The number of vessels transiting through the Northern Sea Route in 2013 amounted to 71. True, not a large figure in absolute terms, but getting larger every year – from 46 in 2012 – and carrying ever more freight – already over 1,3 million tonnes last year. These numbers will continue to increase. Also, Arctic tourism is another growing industry that can be attributed to increased access to and within the region.

For this scenario to continue to materialise and develop in a favourable direction, we as governments, but also you as businesses and industries need to prepare in advance, build on each other strengths and add capacities where need be. We also, as I mentioned before, need to pay full attention to the inevitable restrictions and challenges that increased economic and human activities entail in this highly complex and environmentally sensitive region. 

The Arctic will always be the Arctic, not the Mediterranean to take a popular anecdote from the discourse on the Arctic. It will probably be more like the Baltic Sea. Although it is warming up, it will still be cold. The weathers in the Arctic will continue to be unpredictable and the high seas hazardous. Drifting ice is no less dangerous than bigger icebergs. The stakes are high for states and businesses and there will be sensitive balances to strike between exploitation and preservation. And we must always remember that there are people, including indigenous peoples, living in these areas, whose livelihood and rights need to be fully protected.

I am, however, optimistic we will be able to tread the golden path, find the necessary balances, and address in good co-operation opportunities and challenges alike. I base my optimism partly on the fact that the Arctic is a well governed area. The institutions and legal arrangements in the region are firmly in place. The Arctic Council is developing with self-confidence into a decision-making body with an ever growing international attention and attraction.

All Arctic states agree that the United Nations Convention on the Law of the Sea should be our guiding light in resolving legal matters and any outstanding disputes. Indeed, the Arctic states have a history and good record in resolving their differences in a cordial and peaceful manner.

The Arctic states also agree on the need to co-operate on prevention and response in addressing the potential opportunities and challenges ahead of us. Two legally binding agreements on Search and Rescue and Oil Spill Response have been agreed to in recent years, and, as I mentioned previously, an Arctic Economic Council – a public-private enterprise – is currently being developed. 

So, despite small nuances and differences in individual positions, the Arctic states, by and large, share the same vision of co-habitation and co-operation. In short, the framework for co-operation in the Arctic is solid and rules of the game clear. The opportunities are for us to seize in a responsible manner, bearing in mind the various accompanying challenges.

Ladies and gentlemen.
Let me now zoom in on Iceland and where I see the economic and business opportunities lie. I see those mainly in two streams; in the production line and in the service sector.

Let me start on the production side. We see increasing evidence point to considerable oil and gas reserves in our own Dreki area. Only recently, Icelandic authorities issued the third licence for prospecting, exploration and production of hydrocarbons where Petoro Iceland will participate along with the Chinese oil company CNOOC International and Eykon Energy. In early 2013, the other two licences were granted to Faroe Petroleum Norge, Iceland Petroleum and Petoro Iceland on the one hand, and Valiant Petroleum, Kolvetni and Petoro Iceland on the other hand. 

Ergo, a lot of interest internationally and domestically and increasing belief, supported by accumulating data, that oil and gas is to be found in the Dreki area.   

This notwithstanding, it is also important that governments, industries and other relevant stakeholders continue to develop renewable energy resources in tandem with responsible utilisation of non-renewable energy sources. 

Here, I believe Iceland is in a particularly good position to lead by example and this is another area where other and ample opportunities lie. We have, for example, been successful in exporting renewables´ knowledge and expertise, not least geothermal in Eastern Africa, but also hydro closer to home, including in Greenland. Renewables will not resolve all our problems but those are becoming increasingly technologically accessible and reliable energy sources and could be utilised by millions of people worldwide for electricity and heating, including in the Arctic.

I could foresee that not only would we apply the highest environmental standards in extracting oil and gas in Dreki and other potential oil fields off Iceland, but also make use of the potential material wealth and dividends to invest further in human capital, necessary infrastructures and alternative energy resources.

This way, we can reap the potential economic benefits of extracting oil and gas and, at the same time, address the importance of long-term sustainability and human investment. 

Opportunities also lie in the service sector. In a regional context it seems sensible to regard the Dreki area and other potential oil and gas fields off the east coast of Northern Greenland and in Jan Mayen waters as one entity as infrastructure and service for this area will in all likelihood be interlinked.

Furthermore, the opening up of alternative transportation routes put Iceland in a favourable geostrategic position for the provision of trans-shipping and other related services. In Iceland there is good infrastructure such as international airports, deep and ice-free fjords and port potentials. 

This is a scenario that we need to prepare for and already are. For example, Bremenports, in co-operation with local authorities in the northeast of Iceland and EFLA consulting engineers, are conducting researches on developing a multi-purpose harbour and related services in the fjord of Finnafjörður, in the eastern part of Iceland. In the next 2-3 years further studies will be conducted and, within that timeframe, actual decisions on the possible realisation of the project are likely to be made.

The development of industrial harbour and service facilities in Dysnes, close to the town of Akureyri in the northern part of Iceland, where Mannvit consulting firm and numerous strong local entities have joined forces, is yet another example of an advanced project.  

I could mention other examples – a concept study by Mannvit consulting firm for the development and construction of a transit building harbour and a 450.000 cubic metres oil terminal in the fjord of Reyðarfjörður, in the east of Iceland.

Fáfnir Offshore has invested in Iceland´s first platform supply vessel, a state-of-the art vessel to service the Arctic island of Spitsbergen and other Arctic areas. Numerous projects related to Arctic innovation and know-how are also being developed and Iceland´s shipping companies, including Eimskip, are looking into the alternative shipping routes up north.

These and many other projects, which, indeed, differ in size and scope and are at a different stage in their advancement, all bear witness to the possibilities and opportunities entailed in the developments in the Arctic and Iceland´s position there within – both in terms of nature and geography, and skills, knowledge and expertise.

Also, in terms of providing services and exploiting our expertise and know-how let me mention that my government, in close co-operation with myriad of stakeholders, is looking into the possibility of establishing an international rescue and response centre in Iceland. Here, our eyes have, not least, turned to the Keflavik area, which has good logistical facilities to offer, including our largest all-weather international airport, deep ports, hangars and accommodation facilities and valuable expertise.

This approach – to merry the potential economic advantages with the accompanying environmental and security challenges – is an imperative one from my standpoint and cannot only be the responsibility of the State. Here, other stakeholders like municipalities, academia, businesses and industries all have a role to play.

In fact, the private sector will largely drive the pace of economic developments as they emerge.  It, however, continues to be important for policy makers and the private sector to be closely engaged; that governments create the environment conducive to the various necessary investments whilst at the same time applying the highest labour and environmental standards, and that the private sector adheres to those standards and commits to sound policies on social responsibility. 

Ladies and Gentlemen,
I hope you can take from my remarks that my government remains fully committed to the Arctic and exploiting the opportunities that are emerging, but also in addressing the challenges and long-term sustainability in the region. This cannot be the sole responsibility of governments, which is, again, why I welcome a dialogue of this nature. 

I remain optimistic that we will, in good co-operation, be able to strike the right balances and continue to progress in a favourable direction. The Arctic is, indeed, warming up for business, but, as I also keep saying, we still have to keep our heads cool. 

Thank you.