Ladies and Gentlemen,
It is a pleasure to address you here today.

The Prime Minister gave you an introduction to the Norwegian energy issues. I will be more detailed in my presentation.

Our energy policy is based upon the management of two energy sources, hydropower and petroleum.

Electricity
Let me start with a brief outline of the electricity market, a topic that got a lot of attention in the US last summer.

Our hydropower production puts us in the unique situation that this clean energy source is supplying almost one hundred per cent of our electricity. The generating cost of hydropower in Norway is relatively low and Norwegian industry has traditionally been based on the use of electricity.

As one of the very first countries to do so, Norway deregulated her electricity sector in the early nineties. Tariffs and income in the transmission and distribution systems are regulated, but there are no restrictions on the retail price of power. Today there is a common electricity market in the Nordic countries.

This way of organising the electricity sector gives a flexible power market. It is our impression that the power exchange and the use of bilateral contracts do set an efficient price. We are convinced by the experience gained so far that to liberalise the power sector has been a success. Our electricity system is characterised by substantial variations in total production capacity due to variations in precipitation. The flexible Nordic market is particularly well suited to handle these variations in production as prices fluctuate a lot with variations in supply and demand.

The prices of electricity have decreased in real terms after deregulation. There have been hardly any investments in new generating capacity, and demand continues to increase. This is, naturally, a result of a successful deregulation. Nevertheless, this development does give reason to worry about the future power balance. We must take wisdom from the US experience and what happened in California to make sure we do not end up with a supply shortage. Our dependence on hydropower makes us particularly vulnerable in a possible dry year given the present situation with no excess capacity.

It is a main goal in our energy policy to secure sufficient capacity for electricity generation and transmission to meet future energy demand, and that this capacity is provided within a concept of sustainable development. There are still possibilities for further hydropower development in Norway, although not to the extent we have seen earlier. About 20 percent of the hydropower potential are in protected watercourses and are therefore not available for development. This leaves a hydropower potential estimated at 144 TWh, where about 113 TWh already is developed. However, many of these projects are not sustainable.

Another possibility is using our gas-resources not only for export, but also for internal consumption. Gas may replace fuel oil in some industries and in households. Gas also may be interesting in the transport sector. In addition gas for electricity generation is a possible solution for the future. We are now working on methods for separation, injection and storing of CO2 from gas fired power plants and I am prepared to strenghten the research funding on this topic. I find this interesting. Any developments in this regard must be fully in line with environmental considerations and our Kyoto-commitments.

Oil and gas
Let me now turn to the oil- and gas sector in Norway.

Oil was first discovered offshore Norway in the late sixties, and production started in 1971. We have during the last thirty years continuously expanded our production capacity and will produce 3,1 million barrels a day this year, production of LNG excluded. Our internal oil-consumption is limited and we are hence ranked as the third biggest exporter of crude oil in the world.

Our gas export has increased significantly over the same thirty years. Norway is today an important supplier of natural gas to Western Europe. We currently have a market share of 12 per cent and this share is expected to increase further in the years to come.

These figures demonstrate that Norway is the biggest petroleum exporter within the western world. Our position as a reliable source of oil and gas is therefore not without importance. The security of supplies is of concern to the United States as well as its allies. Norway, being an allied nation within NATO, increases this security.

We expect the next five years to represent the peak of our oil production, but it is important to note that we see a significant potential for further production and developments. I would like to bring to your attention that Norway has a potential for another 50 years of oil production, and gas for 100 years to come. In my opinion, the prospects are looking good for an industry many outsiders seem to think is in rapid decline.

About 50 % of the increased Non-Opec oil supply during the 90ies came from the UK and Norwegian part of the North Sea, and was to a large extent due to unforeseen enhanced oil recovery. A number of factors are involved, but technology is viewed as being the main contributing factor behind the improvements in productivity of the major fields, especially with respect to the use of new technology within drilling and reservoir characterization. This pinpoints the importance of technology and research. I would like to see even more research and technology development in Norway and will seek to establish a framework that encourages this to happen. This will include more funding for research activities.

Our continental shelf is divided into three areas with different types of risks and rewards. Hence we face different challenges, but let us not forget that this also gives the companies operating in Norway different opportunities.

The North Sea basin is maturing, and hence future developments will have different characteristics compared to the ones we know. Developing smaller discoveries and increasing the recovery rate from existing fields is of crucial importance. These objectives have implications on how fields are developed and the way that we use existing infrastructure. New developments, mainly satelitte fields, are in general profitable under 10 US dollars.

The Norwegian Sea is less mature than the North Sea. We hope to see new, significant discoveries in this area. Prospects are looking good both for oil and gas, but gas is expected to be dominant in new discoveries. The water depths reach 1500 meters and the climate is rough. Here you might find similarities to some of the challenges in the Gulf of Mexico. The challenges related to gas infrastructure and to protecting the fishing interests and the environment must not be forgotten. We believe there is reason to be optimistic about the future. We aim for an announcement of the 17th licensing round in December for the Norwegian Sea.

Developments in the Barents Sea are linked to Statoils LNG-project, "Snøhvit". This project may well add to the supply of gas to the US in the future. The Government is concerned about any possible environmental impact the petroleum activities may have and will evaluate consequences from exploration and production in the Barents Sea closely.

There will still be a need for companies on the NCS with competence and ability to adopt to the different challenges. American companies have contributed in the past and they will likely do so in the future. The nationality of the companies is not of importance to us, but the know-how of the American companies make them good candidates for further tasks.

I would like to remind you that significant changes have taken place in the framework for the Norwegian Continental Shelf during the last ten to fifteen years. The policies are constantly reviewed, renewed and adopted to the given situation. The participating companies are therefore faced with a different situation than in the early days of petroleum production in Norway. We have seen valuable contributions from foreign companies, not least American, and we have long ago reached the stage where the Norwegian companies have gained the level of competence where they compete with foreign companies. More decisions are now left with the companies and the state's involvement is redefined. It has always been a guiding principle to attract the most competent international companies with knowledge and capital.

Let me be more detailed and describe the changes in the state's organization of the petroleum activities.

Statoil was established in 1972 as the state's commercial instrument in petroleum activities. It was long a privileged national state-owned company.

Statoil's role in Norwegian oil and gas policy has changed fundamentally over the past 10-15 years. The company operates today under the same commercial terms as the other participants on the Norwegian Continental Shelf, and is no longer an instrument of petroleum policy.

The company has long ago stepped out of Norway and has secured a number of good positions in other petroleum provinces.

Statoil was partly privatized and listed on the New York and Oslo stock exchange earlier this year. The state remains the dominant shareholder owning about 80 per cent of the company.

In addition to Statoil, the state participates directly in the petroleum activities in Norway through a special ownership arrangement in most production licenses. The state pays its equal share of all costs and gets its part of the profits in return. The state has sold, or will sell, one quarter of it ownership in this special arrangement.

The restructuring here described will give the companies present on the Norwegian Continental Shelf increased ownership in the production licenses. Larger holdings will provide stronger incentives, allow for more economies of scale and coordination benefits in and between licenses and strengthen the decision-making processes. This will enhance exploration, development and operational efficiency as well as extending production. I am of the opinion that substantial value will be realized as a result of the reorganization.

Our oil- and gas export plays an important role in an economy counting no more than 4,5 million inhabitants. But I will pinpoint that we, unlike some other major oil-exporting countries, are not entirely dependent on these revenues. In the year 2000, a year with relatively high oil-prices, the oil- and gas sector contributed one quarter of our GDP.

There is however no doubt that the oil prices have an effect upon the Norwegian economy. Norway aims at stable oil prices at a level that is acceptable for oil exporting as well as oil importing countries. Our aim is to avoid prices that will harm the economies of oil exporting countries, but also to avoid prices that can be harmful to the world economy.

Such considerations have, as some of you may have noted, brought Norway last month to announce an intent to cut oil production by about 100-200 000 barrels a day. Since last summer we have seen a significant decline in crude oil prices. The severe slowdown in the world economy and the tragic terrorist attacks 11 September have reduced the demand for oil. Oil supply however, has continued to grow. This imbalance between demand and supply has caused the oil price to fall from about 30 USD in the spring to 16-17 USD by the middle of November. Being a significant oil exporter these price developments give rise to concern.

But it is first of all the prospects for a further decline in crude oil prices that has worried me. We believe that if supply is not reduced, there is a risk for a further decline in oil prices, perhaps as low as 10-12 USD. The experience from 1998/99, when oil prices fell to 10 USD per barrel, taught us that it is difficult and takes time to stabilize the oil market. Consequently, this time we decided to act in advance, in order to avoid a situation similar to the experience three years ago.

Our experience from 1998/99 is that low oil prices lead to a standstill in exploration and development activities. In longer term this will weaken the oil security and lead to more price fluctuations. Consequently, I believe that oil importing and oil exporting nations have a common interest to avoid very low oil prices to prevail in the market.

Norway's decision to reduce production is unilateral and strictly responds to the national interest. If the measures do not have the desired effects, they will be suspended.

Conclusion
When you look to Norway and how we have organized our energy activities you will find differences from what you see in the United States. But you will also see that we have a lot in common. And you will see that there is a mutual need for co-operation to reach common goals.

I am confident that Norway will continue to develop its resources and its competence within energy.

And you can be confident that Norway has the ability and capability to share with you its resources and its competence.

Given the resource base, the changes in the framework and the commitment from a strong and competent industry, I see a promising future for the oil- and gas sector in Norway.

A future we invite you all to participate in.