Press Release

March 4, 1998

Plan for implementation of investments in the Norwegian petroleum industry

The Norwegian Ministry of Petroleum and Energy's review of the oil companies' investments plans in the petroleum industry, shows a significant increase in investments compared to earlier estimates. The estimated investments for 1998 have increased by more than NOK 13 billion to almost NOK 67 billion.

The increase is due partly to profitable additional investments in some projects, timing effects as some investments will be realised earlier than expected, and not least due to increased costs because of the pressure on capacity in the industry.

With the general boom in the Norwegian economy, the Government is seriously evaluating the increase in petroleum investments. At a time when the economy needs counter-cyclical measures, the increase in petroleum investments represents a strong growth pressure in the mainland economy. The boom is also evident within the industry itself with among others, shortages in some categories of labour force, rig rates at record levels, full capacity utilisation in parts of the supply industry and a clear trend of increased costs in projects. In this situation it would be in the best interest of all parties concerned to even out the investment level.

On this background, the authorities have during the last few weeks reviewed both the total level of activity and the implementation plans for individual projects. In this process there has been a good cooperation with the companies in the industry, specialists and relevant interest bodies.

"The Government has decided to approve all projects in the normal manner, but with an adjusted implementation plan where the start up of investment for all fields under consideration is shifted with one year from 1998 to 1999. In this situation, the Government will not establish a queue-arrangement for investment projects in the petroleum industry," says the Minister of Petroleum and Energy, Marit Arnstad.

Investments in new pipelines and on-shore facilities are necessary to ensure the transport of petroleum from fields in production or under development, and should thus not be moved. Nor will investments in approved projects be shifted since it would lead to very heavy losses both for the companies and for the state.

The effect of the shifting of the start up of investments for all fields under consideration with one year, will be a reduction in investments by approximately NOK 5 billion this year and approximately NOK 12 billion next year.

To provide the companies with stability and predictability, the development plans will be approved in normal manner. For these fields, the companies will be instructed to shift investments with one year, from 1998 to 1999. In the period after approval, the companies can sign contracts and continue with project planning to optimise the projects, but they cannot start major investment activities.

In line with this, a White Paper concerning Snorre B and Gullfaks Satellites phase 2 will be presented to Parliament before Easter. A total assessment of the economic conditions including the situation for the petroleum industry, will be addressed in the Revised National Budget.