Distinguished Audience, Ladies and Gentlemen!

It is a great pleasure for me to be here at the "DEMO 2000 Annual Conference". The Norwegian oil and gas industry has always been characterised by leading-edge technology, and I believe the industry and the government have common goals that depend on further technology development.

The role of the government
The government has through the "Sem declaration" committed itself to undertake an proactive environment and resource policy based on the goal of sustainable development, thus making research and development a priority area. The "Sem declaration" states that:

"….it is important to make sure that the petroleum sector also in the future remains a considerable contributor to financing our welfare society and to the development of industry all across the country. Consequently, it is important that the Norwegian Continental Shelf remains an attractive area for value creation and investments, and that Norwegian companies can strengthen its competitiveness both at home and internationally. For that reason, the government will prepare for industrial and technological development in order to get more out of the resources and to cut costs. Added value will to a higher degree be created out of technology and other human efforts. This demands a strengthened commitment to research and development. The industrial cluster must then be guaranteed framework conditions in order to make this possible. This can contribute to increased internationalisation and have huge positive consequences for the Norwegian society".

In other words, the Government has the following visions for the future:

• That the Norwegian petroleum production will extend far into the future based upon the oil and gas resources, develop and apply new technologies and the presence of competent Norwegian and international companies. This vision implies that the petroleum sector will continue to contribute to the financing of the Norwegian welfare state.
• We want to see Norwegian petroleum companies and the Norwegian petroleum industry 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.
• 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 specially sensitive areas, several hundred meters below sea level, with due regard to the environment. All petroleum activities must be within the concept of "sustainable development".

The importance of technology
Development of new technology is obviously important in the process towards realising these visions. Through OG21 the Norwegian oil and gas cluster wishes to continue the co-operation along the whole value chain from basic research to breakthrough in the market. The objective of the Ministry of Petroleum and Energy is to develop a national strategy aiming at establishing a more co-ordinated and focused approach to research and development within the whole oil and gas industry.

The two main dimensions of OG21 are value creation and competitiveness. This is to be achieved through enhanced cluster performance in dynamic technology networks. In addition, strengthened technology development on the Norwegian Continental Shelf will have a positive impact on the environment. A third dimension in the work of OG21, is therefore long term environmental sustainability.

The previous Bondevik government initiated Demo 2000, which is an outstanding example of what can be achieved by working together: 200 million in government support has triggered projects worth 800 million kroner. New technology can reduce the balance price per barrel by several dollars, hence make new developments possible. This improves the competitiveness of the supply industry, both at home and in the export market. DEMO 2000 has, because of its impressive results, also received international recognition.

Social significance
The petroleum sector has created enormous wealth for the Norwegian society. Last year (2000) exports from the oil and gas industry amounted to nearly half of total Norwegian export revenues. And for a small and open economy like Norway it is therefore particularly important to take the consequences of a more integrated world economy seriously. This government is prepared to face these challenges.

I see no reason to be pessimistic about the future of the Norwegian oil and gas industry. The resource base on the Norwegian Continental Shelf provides us with another 50 years of oil production and 100 years of gas production. According to IEA (and others) there will be a steady increase in the demand for energy. However, both the Norwegian Continental Shelf and the Norwegian supply industry must compete globally for capital, competence and markets.

Industrial opportunities and challenges
The activities on the Norwegian shelf has provided the basis for a ground-based large-scale industry delivering goods and services to the home market worth between 70 and 90 billion Norwegian kroner per year. However, the supply industry is facing increased competition from Europe, the US and Asia. Now the challenge is to make sure that the supply industry is able to develop new products and markets while we still have a strong industrial position and a highly competent cluster. The oil and gas industry requires highly competent workers and will constitute the basis for new jobs in the future. An example is that the oil and gas industry through several years has been the single largest user of advanced information technology.

The potential for competence based value creation is larger within the oil and gas industry than in any other business. The value of the production on the Norwegian Continental Shelf can be increased significantly beyond today's plans by finding new solutions for enhanced oil recovery and reduced development costs without increased environmental effects.

The Norwegian supply industry must develop products for new export markets in a situation where there is strong competitive pressure at the home market. The goal of the industry is to increase its exports from 28 billion kroner per year to 50 billion kroner by 2006.

Making innovative technology a priority area is a prerequisite for achieving this goal – key words are:

• EOR – Increased oil recovery.
• Subsea and deep water production.
• Natural gas.

Increased recovery
That the oil and gas production has become far larger than expected is mainly due to enhanced oil recovery. A number of reasons are involved. Technology development has undoubtedly been the triggering factor behind the improved productivity of the major fields. Innovation has especially been important within drilling and reservoir characterisation.

When including existing plans for increased recovery, the average recovery rate is anticipated to reach 44 percent. But we should be more ambitious! Therefore our goal is to reach a recovery rate of 50 percent for oil and 75 percent for gas. The management of our gas resources is important in this respect. Today, about 40 percent of our gas production is used for injection to increase the oil recovery.

Subsea and Deep water
Money, energy and the environment can be saved by replacing massive and expensive equipment on the platforms with gear on the seabed and inside the well. Norsk Hydro, being an active participant in DEMO 2000, has been highly successful in its development and onshore testing of a new downhole separator for horizontal wells. This has resulted in innovative and effective technology that allows separation of oil and water below the seabed. Processing within the reservoir, where the oil, gas and water lie in layers, takes seconds compared to several minutes on the platform. Once the oil is brought up to the seabed, conditions become less favourable.

Hydro is already testing Troll Pilot, which separates water and oil on the seabed. The water is reinjected into the reservoir and the oil is brought up to the platform. The successful operation of Troll Pilot and successful testing of the downhole separator will pave the way for subsea installations that can replace large and complex process plants on platforms and vessels.

A combination of subsea separation and downhole separation will provide the flexibility and reliability needed for future subsea developments. Compared with conventional technology, the combination of separation on the seabed and inside the well will also be beneficial to the environment through reduced energy consumption, reduced use of chemicals and lower CO2 emissions.

Natural Gas
The government aims at establishing framework conditions that makes it possible to realise zero emissions power plants. Also, 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 export.

Norway is a major producer of natural gas, and almost all gas that is not injected is exported. We have vast gas reserves, and this provides opportunities for further domestic use of gas. Natural gas can be used in an environmentally friendly manner for energy purposes, as raw material for the industry and in the transport sector. The government wants to encourage use of natural gas for domestic value creation. Thus, there is a need for making distribution and domestic use of natural gas a priority area. In an introduction and development phase it will probably be necessary to provide government assistance to the construction of gas infrastructure. The parliament has previously requested the preparation of a coherent strategy for use of gas in Norway. The Ministry of Petroleum and Energy is in the process of following up this matter with a thorough examination of important questions relating to domestic use of gas. The "Sem declaration" has a broad focus on the use of natural gas and gas technology, and we emphasise that we will follow up this work with a white paper dedicated to the issue of domestic use of gas.

Further, the government wants to intensify public research efforts relating to new environmentally friendly technologies for use of natural gas. This autumn we established an official committee that will consider different aspects of environmentally friendly natural gas technology, including zero emissions power plants. The gas technology committee will present its report 1 March 2002. This report will be an important contribution regarding technology in relation to the presentation of the white paper about gas.

Conclusion
Norway is an attractive place for development and use of new technology. It is important to maintain a mechanism to secure that a company that wants to enter the Norwegian Continental Shelf, either as operator or licensee, is made aware of the desire to develop technology in Norway that later can be exported. The Norwegian Continental Shelf is among the leading in the world when it comes to make use of innovative technology – there is nothing that indicates that this technology should not also be developed in Norway.

The petroleum sector's ability to face the challenges both on the Norwegian Continental Shelf and internationally is dependent on a good and effective interplay between the industry, research institutions and the government. Such an interplay will also secure focus towards challenges and needs on one side and access to competence, ideas and technology on the other.

Decisions we make today will influence the future value creation and both government and industry will therefore benefit from research, improved technology and a competent labour force. This government would like to see even more research and technology development in Norway and seeks to establish a framework that encourages this to happen.

Closure
I want to encourage the oil and gas industry to continue contributing to the development of leading-edge technology in Norway. We also understand the need for a substantial contribution from government. With our resource base, emphasis on environmentally friendly solutions, as well as the competence held by the companies on the Norwegian Continental Shelf, we face the best conditions for further value creation.