Foils (in pdf format)

Ladies and Gentlemen,
It is a pleasure to be in Houston and address you here today. The Gulf of Mexico has always been a driving force in shaping the global oil and gas industry. This is a good place to seek inspiration and to share knowledge and experience.

Facts on the Norwegian oil and gas production
Before I address Norwegian oil and gas policy, let me first say a few words about the Norwegian oil and gas production:

Oil was first discovered offshore Norway in the late sixties, and production started in 1971. During the last thirty years we have continuously expanded our production capacity and will produce 3,1 million barrels a day this year. Our internal oil consumption is limited, and thus we are ranked as the third largest 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 total market share of 12 per cent. This share is expected to increase further in the years to come. Total gas production in 2000 was about 3,3 trillion cubic feet tcf, of which about 40 per cent was reinjected. The rest of 1,8 tcf was exported. Gas represents a cleaner source of energy than both oil and coal, which adds to the future market potential for gas.

These figures illustrate that Norway is a substantial petroleum province in a global context. Even though we are a small nation of some 4 million inhabitants, our position as a reliable source of oil and gas is significant.

The security of supplies is important to the United States, as well as any nation depending on imports of petroleum products.

We expect the next five years to represent the peak of our oil production. However, we still 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. In other words, prospects are looking quite good.

Oil market considerations
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 can disturb the world economy.

Such considerations brought Norway to cut oil production by 150 000 barrels a day from 1 January to 30 June 2002. Last summer we saw a significant decline in crude oil prices. The severe slow down in the world economy, and the tragic terrorist attacks 11 September, reduced the demand for oil. Oil supply, however, continued to grow. This imbalance gave rise to concern.

The experience from 1998/99, when oil prices fell to 10 USD per barrel, taught us that it is difficult to stabilise the oil market. This time we decided to act in advance in order to avoid a situation similar to the experience three years ago.

In 1998/99 low oil prices lead to a standstill in exploration and development activities. In a longer term, this would undermine the security of supply and cause even more price fluctuations. Consequently, I believe that oil importing and oil exporting nations have a common interest in avoiding too low oil prices, as well as too high prices, to prevail in the market.

Now let me turn to the challenges confronting the NCS
During the last 3-4 years, dramatic changes have taken place in the global Exploration & Production business. Sparked by the sudden drop in the oil price in 1998/99, the industry is going through a major restructuring phase.

This has brought on a new set of players on the global energy arena. The level of competition has intensified.

Combined with a maturing Norwegian Continental Shelf this has made it mandatory to adjust our policies. The goal is to maintain a sustainable petroleum industry in Norway. There are two overriding objectives that need to be fulfilled:

• The competitiveness must be enhanced. The Norwegian Continental Shelf must remain an attractive area for investment.
• The Norwegian oil and gas industry needs to be competitive on a global basis. For oil and gas companies, as well as suppliers and contractors, it is no longer an option to confine operations to the home market alone.

Now let me point to some of the policy means to meet these objectives:

Regulatory Framework
There is a continuous work in the Ministry to maintain an efficient and competitive regulatory regime. In the last couple of years this work has resulted in several changes in the regulatory framework, and I will just mention some key items:

Two years ago, the Ministry did a thorough examination of the regulatory regime. The industry was involved in the process, which ended up in two very important aspects; simplified regulations and increased predictability.

Last year, Statoil was partly privatised, Petoro, the company administering the State's Direct Financial Interests - SDFI - and Gassco – the new gas transport company - were established, and an evaluation of the fiscal regime was performed. The decided restructuring of the SDFI portfolio was recently finalised.

Eventually, the organisation of the gas transportation system is currently being evaluated.

More decisions are now left with the companies themselves, and the state's involvement has been redefined and reduced.

Technology and Competence
Today, I think the quest for human capital stands out as the major challenge.

The petroleum industry has advanced well beyond the days of blue collar work. 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 pressure to comply with 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.

The Government will therefore take an active approach to these matters. The Government will work to make the petroleum sector attractive for young people. It will continue to improve the educational and training framework to enhance the level of competence in the petroleum sector

Faced with the growing complexity of offshore operations, technology will be a main driver for the value added.

The resources on the Norwegian Continental Shelf represent a value potential without parallel in a national context. Stronger attention needs to be paid to these unexploited opportunities. They can only materialise through future technology development. Ambitions are high:

• Market fluctuations in 1998-99 showed that Norway’s offshore operations need to become more commercially robust. Demo 2000, a programme on project oriented technology, has helped to identify solutions that can reduce the break-even price for new developments by 2-3 USD per barrel. Technological leaps, such as downhole separation, could offer further cost reductions.
• It is an aim to improve oil recovery from an average of 44 to 50 per cent. For gas we aim at 75 per cent. Reaching these targets imply the use of technology that is not available yet.
• We also aim at long term environmental sustainability. This is also offered by technology development. For instance, separating wellstreams on the seabed or downhole would save energy and reduce emissions.
• By developing and utilising new technology, the oil and gas industry creates business opportunities in the international market place. It is a challenge from both a government and an industry perspective to make sure that technology developed in Norway can be commercialised for a global market.

Internationalisation
In the past the supply market in Norway was constantly growing. Investments peaked in 1998 with about 9 billion USD. For the next five years annual investments are expected to exceed an average of 7 billion USD. 1Kurs mot NOK: 8,5 This is still quite significant.

The future of our 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 3 per cent. In a longer term, it must be a fair ambition to have 4 to 5 per cent of the international market.

With the Norwegian Shelf maturing, it is vital for the two Norwegian oil companies Norsk Hydro and Statoil to go international, acquire new acreage and utilise their experience and competence in other areas of the world. Norwegian investments in exploration and production abroad are already substantial and growing rapidly.

It is interesting to note that Norsk Hydro and Statoil already have acquired positions in demanding markets, such as West Africa and the Caspian area. Norsk Hydro recently entered the Gulf of Mexico, and it was my privilege to open the Norsk Hydro office here in Houston yesterday.

Conclusion
To conclude, I would like to point to the potentials of the NCS:

First, the track record for making new discoveries is very good. The 2001 discovery rate was 60%. Norway has been and is able to compete with the most promising petroleum provinces around the world, especially with regard to gas discoveries.

Second, the future level of activity is expected to be significant. On average, annual capital expenditure will exceed 7 bill USD for the next five years. Besides, there is a substantial market for maintenance and modification.

Third, 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.

Like the Gulf of Mexico, the Norwegian Shelf is a vibrant petroleum province. There is plenty to play for, both for the supply industry and the oil companies. The challenges are immense. Potential rewards are great. I think the OTC will prove my point. I look forward to seeing you again in Stavanger on the Offshore Northern Seas 2002.

Thank you for your attention.