Distinguished guests, Ladies and Gentlemen,
The new Norwegian Government took office on the 19 ^th> of October. I had the honour and privilege to be appointed State Secretary in the Ministry of Petroleum and Energy. I am looking forward to be working on issues of vital importance to Norway.

It is a great pleasure for me to be here and share with you some thoughts on the global challenges confronting the petroleum sector.

Introduction
The oil and gas industry has always been international. This was also the case for the Norwegian petroleum sector, when we started our offshore activities some 35 years ago. At the time we had the challenge of developing a national petroleum policy.

Since then the world has changed dramatically. Let me mention some examples:

• Energy markets and capital markets have been liberalised
• Consolidation trends with mergers and acquisitions are bringing on a different set of players on the global energy arena.
• International competition is intensified
• There is an increased public concern for the environment and for corporate social responsibility

These trends do not represent a complete listing, but they illustrate that both the industry and the authorities have to take on board the consequences of a more integrated world economy. For a small and open economy like Norway this is particularly valid.

Priorities of the New Government in the Petroleum Sector
This Government is prepared to meet these challenges based on the following visions for the future:

• The new Government has a vision to see Norwegian petroleum production extend well into the future based upon the oil and gas resources, development and application of new technologies, and the presence of competent Norwegian and international companies. This vision implies that the petroleum sector will continue to contribute to financing the Norwegian welfare state.
• We want to see Norwegian petroleum companies among the leading companies in the world. Furthermore, the vision is to see the players on the Norwegian Continental Shelf as world leaders when it comes to increased oil and gas recovery.
• We want increased focus on research and development. As the IEA also emphasizes in its recently released World Energy Outlook of 2001, the energy supply outlook will depend on technology.
• Last, but not least, we want the Norwegian oil and gas industry to be in the forefront when it comes to protecting the environment and safety offshore. It is a major challenge to exploit the resources in the arctic zone; several hundred meters below sea level, with due regard to the environment and to the fishing interests. All petroleum activities must be within the concept of sustainable development.

The Government will constantly work to adjust the Norwegian oil and gas frame conditions so that we are able to attract the most qualified companies. We believe that the role of the Government is to develop a framework, within which the industry will find it attractive to work. At the same time the Government has an objective to maximise the income for the state through the tax system and the state's economic interests.

Significant changes have taken place in the framework for the Norwegian Continental Shelf during the last ten to fifteen years. Policies have constantly been reviewed, renewed and adopted to the prevailing realities.

Today, the industry is faced with a different situation than in the early days of petroleum production in Norway. More decisions are now left with the companies themselves, and the state's involvement has been redefined.

Now let me turn to some of the more specific challenges for the industry:

The Restructuring of the Oil and Gas Industry
Over the last few years we have seen a dramatic restructuring of the global Exploration and Production industry. Largely driven by the dramatic fall in the oil price in 1998, oil companies worldwide have been introducing cost cutting measures and consolidating their positions. A number of mergers and acquisitions have resulted in fewer oil companies, but some of the companies have grown substantially.

The supply industry has also been affected by these structural changes. The acquisition of Umoe by ABB, and the latest discussions on the future of Kværner illustrate this point.

Consolidation trends combined with more specialised suppliers entering the scene, provide a potential for a more cost efficient utilisation of the resources. However, these trends also mean that competition intensifies. The players, and in particular the major ones, have strengthened their position vis-à-vis contractors and suppliers as well as host nations. Now they have a stronger financial base, more focused strategies and more markets available to them.

For the Government it is therefore a challenge to maintain pluralism on the Norwegian Shelf and reap the benefits of diversity and specialisation within the industry. In the North Sea for instance, there is a need for players with expertise in marginal field developments and tail end production. Thus, we welcome new companies.

It is therefore a prerequisite that framework conditions are attractive with regard to political stability, predictability and a sound business environment.

This represents a growing challenge. Today, the flow of capital is free, and the international petroleum industry has access to large reserves in Africa, in the Caspian area and the Middle East that were not available a decade ago. As a result, host nations are faced with increased competition for foreign investment - and with the challenge of maintaining a competitive and sustainable domestic industry.

In this regard, the quest for human capital stands out as a major challenge.

The petroleum industry has advanced well beyond its first and more primitive days. It is now a sophisticated industry relying on the latest information and communication technology. Skilled labour and highly qualified academic resources are needed to exploit resources that are increasingly demanding to discover and produce. Intensified awareness of new financial requirements, ethical principles and environmental concerns calls for the very best of human capital. Otherwise, the petroleum sector will lose out to other industries.

For Norway, which is faced with competition from other technology and competence centres such as Houston and London, it is necessary to further strengthen the national competence base.

Technology
This Government will therefore take an active approach to these matters. In this respect, the development and use of new technology are fundamental.

The main goals for the Government when making technology a priority area is to:

- enhance value creation on the Norwegian Continental Shelf, and
- to maintain a sustainable petroleum industry based in Norway.

By constantly upgrading our technology base we can better exploit our resources. Thus, we create a foundation for increased income for the companies and for people living in our country.

By developing and utilising new technology, the oil and gas industry also creates a potential for business opportunities in the international market place.

The challenge from both a Government and an industry perspective is to make sure that technology developed in Norway can be commercialised for use in our export markets as well.

In this context, I would like to highlight the potential that lies with the development of environmentally benign technology. There is an increasing global awareness for the need to protect the external environment and the safety of people.

Companies that are able and willing to take health, safety and environment into account when developing new technology will no doubt be better positioned in the global market place. Thus, environmental concerns must be an integral part of the companies' business philosophy.

On a larger scale, we face a wide range of technological challenges on our way towards a sustainable energy future. This Government wants to encourage the progress of technology in these matters.

Let me also mention the promising prospects attached to the large reserves of natural gas on the Norwegian Continental Shelf. Natural gas can be used in an environmentally sound way for energy supply, as raw material, and in the transport sector. The Government sees domestic use of natural gas as a potential for value added. This represents a unique opportunity for the petroleum industry to diversify – not only on a domestic scale, but also in terms of exports.

Internationalisation
In the past the supply market in Norway was constantly growing. It peaked in 1998 with about 9 billion US$ investments. In the future, the Norwegian supply marked is expected to be in the order of 5-6 billion US$ 1Exchange rate: 8.75, which is quite significant.

The future of our own supply industry will depend on its ability to compete for a fair share of the domestic market as well as obtaining contracts in the international market.

The latter is a market of about 180 bill US$, of which we now only have a share of between 1 and 2 per cent. In a longer term, it must be a fair ambition to have 4 to 5 per cent of the international market. In this process INTSOK will be instrumental and the Government will continue to support the work of INTSOK.

With the Norwegian Shelf maturing, it is vital for Norsk Hydro and Statoil to go international, acquire new acreage and utilise their experience and competence in other areas of the world.

It is interesting to note that Norsk Hydro and Statoil already have acquired important positions in demanding markets, such as Angola, Nigeria and the Caspian area. Norwegian investments in exploration and production abroad are already substantial and growing rapidly.

In this context, I would like to stress that the Government emphasises that the same ethical standards are adhered to abroad as in Norway. There is a growing focus on the so-called triple bottom line. The triple bottom line implies that a company's performance is not judged by its financial results alone.

Largely as a result of globalisation, companies have to deal with public scrutiny with regard to their environmental and social performance. Corporate social responsibility is no longer a buzzword. It is a reality that the industry has to deal with. I am therefore very pleased to see that INTSOK will devote tomorrow's programme to this issue.

Conclusion
To conclude, there is no doubt that the world economy is growing more inter-related. This represents a major challenge for developing a national industry policy and for sustaining competitiveness.

This is a challenge faced by most countries, and we hardly have all the answers yet. Still, I think there is good reason to be optimistic about the future:

First, as long as there is a significant resource base on the Norwegian Shelf, there will be a need for new investments and industrial activity. Today, the situation is promising also in the longer run.

Second, the Norwegian oil and gas industry has demonstrated the will and capability to go international. By constantly upgrading our skills and competence, and organising our petroleum sector in an efficient way, we can ensure further value creation and meet international competition.

Third, there is nothing saying that the need for hydrocarbons will diminish in the foreseeable future. Its use may be altered as new sources of energy emerge. However, with the flexibility shown by players in the petroleum sector, I am confident that this industry will prevail for a long time.

Thank you for your attention.