Ladies and Gentlemen,

First of all, thank you for the invitation. It is a great pleasure for me to speak at the opening of this conference on the important topic of improved oil recovery.

The Government wishes to ensure that the petroleum sector in the future continues to be an important contributor to fund the welfare society and to achieve industrial development in the whole country. With a maturing continental shelf, actions to increase recovery rates will be more and more important for the overall value creation in the sector. Thus, taking measures to improve recovery rates becomes a key issue in the years to come.

The oil and gas industry in Norway is a success story. During the last 35 years we have gradually built an impressive petroleum cluster. The cluster include oil companies, supply industry, research institutions, universities etc. The petroleum industry has grown to become the leading industry in the country.

A few macro figures from the last two years can serve as an illustration of the oil industry's place in the Norwegian economy. The sector’s share of gross domestic product was more than 20 per cent; its share of exports around 45 per cent; and its share of investments 25 per cent.

The petroleum industry has every opportunity to continue the success story in the decades to come. There is no doubt that market opportunities exist both in Norway and abroad. The future potential of the continental shelf might be illustrated by the resource situation.

During the past 30 years we have produced about 24 per cent of our total expected recoverable resources. That means that 76 per cent of the recoverable resources remains to be exploited.

The current Norwegian oil production is approximately 3 million barrels per day. We expect production to be, more or less, on this level in the next four years. After that, we anticipate a slow decline in our oil production, but slow enough, mark you! – for the oil to last us at least another 50 years.

Gas export is a different story. It will increase in the years to come. Within the next ten years, the annual gas export could reach 100 billion Sm3. This is almost twice as much as we exported last year. Based on the remaining recoverable resources and the expected production rate, we see a potential for more than 100 years of gas production in Norway.

Producing our remaining recoverable resources requires substantial investments. The total investments in fields and exploration on the continental shelf are estimated to a total of more that 450 billion NOK in the next decade. These investment projects, as well as the daily operation of the fields, will generate extensive activity in the land-based part of the petroleum cluster as long as the Norwegian supply industry stays competitive.

Such an outlook to the future activity on our own continental shelf, combined with the market opportunities that are available in other petroleum provinces around the world, does certainly not paint a picture of a cluster approaching the sunset. Quite the contrary – ours is a sector that may hope to be prosperous far beyond the planning horizons that are applicable to most industrial sectors.

However, there is no such thing as a free lunch. New projects must be profitable to be developed and the supply industry must be competitive to get contracts.

Key factors to realize the promised bright future are: reduced costs of exploration as well as of development and production, higher recovery rates, and reasonable prices on our products.

This will require strong efforts and wise decisions both by the industry and the Government. The industry has of course the main responsibility for discovering, developing and producing the resources in an effective way. But the Government has its role to fill as well.

I will use the rest of my time taking a look at the most important ways in which the Government may contribute to the realization of this long-term scenario. In my opinion this is twofold,

1. to contribute to reasonable producer prices on the petroleum products, and
2. to maintain an effective regulation regime.

In addition to this, the Government would also like to be a facilitator for development and deployment of efficient and environmentally benign technology, and a stakeholder in establishing a better public opinion regarding the petroleum activities.

Let me address these different aspects somewhat closer.

First, oil markets and oil prices.
Reasonable producer prices are a key to our offshore activities. The harsh natural environment offshore Norway contributes to relatively high development and production costs at the shelf. Thus, reasonable oil and gas prices are necessary for projects to become profitable, and thus for Norway to remain an attractive investment area for the oil companies.

We see it as important to maintain stability in the oil market, with prices on a level that may be acceptable as well for oil importing as for oil exporting countries. At the end of last year the oil market was oversupplied, and there was a risk of a further significant fall in prices. Therefore we decided to reduce our oil production in the first six months of this year. The decision was unilateral and not part of any formalized agreement with OPEC or producers outside OPEC.

With the agreed production levels I think the prospects for maintaining stability in the oil market is reasonably good. Yesterday the minister was asked how Norway would act if Russia should decide not to go through with their decision to cut. His answer was that in such case the need for Norway to stick to our resolution is even stronger. We will stand by our decision to reduce our production by 150.000 barrels per day in the six months (from 3,17 mbpd to 3,02).

Second, government actions.
There is a continuous work going on 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 closely in the process, which ended up in a set of proposals that partly represented simplification in our regulations and partly increased its predictability – both of which being very important aspects.

Last year, Statoil was partly privatized, Petoro and Gassco were established, and an evaluation of the fiscal regime was performed. The final part of the decided restructuring of the SDFI portfolio will soon be finalized, and the organisation of the gas transportation system is currently being evaluated.

Third, technology.
The petroleum industry has a tremendous ability to develop increasingly more efficient technology. The technical solutions we see today are very different from the one we saw only 10 years ago.

Technological development is a crucial part of solving the environmental challenges we are facing as well. Many of the technical solutions that has been developed and adopted, are increasing the economic performance as well as having a positive environmental effect. It is important to promote and encourage further development of technology that has this dual effect.

Let me add here that it is my firm belief that as the Norwegian petroleum cluster has met the challenges in our rough climate and deep waters by developing leading-edge technology, it will meet the increasing environmental challenges in the same way – and gain new ground in the tough international competition.

There are a lot of different projects going on, aiming to increase recovery rates on the shelf. The magnitude of these projects in the past can be illustrated by the development in the average recovery rate for oil fields. This rate is increased by almost 10 per cent between 1990 and 1997. The value of this increased production is estimated to be between 50 and 100 billion NOK. The value of expected future IOR projects are even higher.

The average recovery factor has now levelled out at around 44 per cent for oil fields. But the objective is to attain an average factor of 50 per cent for the recovery of oil and 75 per cent for gas.

Reaching the targets imply the use of technology that is not available yet. The potential for improving the recovery factor in existing fields is more or less time-critical. If we are going to succeed in reaching these targets, development and deployment of new and more efficient technology within the available time will be necessary. Exchange of knowledge and best practice between Norwegian fields and other petroleum provinces must be an important contribution in this process.

Even though the targets be ambitious, I am convinced that we shall be able to meet them, and thereby create more value as well for the companies as for the state.

Konkraft
The gradual maturing of the Norwegian continental shelf has made it imperative to establish a closer cooperation within the petroleum cluster. This is different from the past, when the oil companies and the supply industry only had a very limited formal cooperation. A body called Konkraft has been established for this end.

I must stress, however, that this co-operation does not mean that full competition between individual firms is of less importance.

Konkraft’s task is to identify and initiate projects that may strengthen the competitiveness of the players on the continental shelf. It shall also keep an eye on established processes and initiatives, such as INTSOK, Oil and Gas in the 21 ^th> Century and Miljøforum. Thus, Konkraft is in a position to address all strategic matters pertinent to the petroleum sector.

One of the very important and basic activities started by Konkraft is to regain respect and interest for the petroleum industry, especially with young people so as to attract them to petroleum related education. In my opinion this is a key element if we are going to be successful in further developing a sustainable cluster within our industry.

It is no doubt a challenge that the public opinion of the petroleum sector does not correspond to the self-image of the sector itself. Oil and gas production tend to be seen as environmentally unsound, even if the Norwecian petroleum cluster is already very concious of its environmental responsibilities. It is just possible that this responsibility, as well as the combination of economic performance with a positive environmental effect, has been difficult to communicate well enough to the public.

The establishment of a common vision between the members of the cluster may be a good starting point if we are going to be successful is this work, a vision that may further enthusiasm among the public as well as within the cluster. I believe that Konkraft may be instrumental in these efforts.

I am optimistic about the future of the continental shelf, and that we will be able to have a prosperous oil and gas industry for the next 50 to 100 years. However, good results depend upon co-operation with national and international actors – also when it comes to measures to increase recovery rates. We need to continue developing our domestic industry, but along with that we depend on active participation from our international partners.

We want to carry on and develop the fruitful co-operation we have with all our partners within the petroleum industry. I can assure you that it is the aim of the Government to develop policies, frameworks and institutions to promote efficiency and improve the competitiveness of the continental shelf.

I wish both organizers and participants a rewarding seminar.

Thank you for your attention.

And now I have the great honour of performing a special task:

awarding the prize for Improved Oil Recovery, IOR.

This is the fourth year that the Norwegian Petroleum Directorate awards this prize. The Directorate wants to acknowledge courage, willingness to take risks, and creative, hard and continuous efforts in order to increase oil production from the Norwegian fields. Norway depends on persons, groups, licenses and companies who are able and willing til challenge technology barriers and see new opportunities – sometimes in spite of setbacks.

The first IOR award was given to Norsk Hydro in 1998 for drilling long horisontal wells close to the oil-water contact on the Troll field. In 1999 the award was given to Saga Petroleum for their "Foam assisted WAG" project on Snorre, and in 2000 Phillips Petroleum was acknowledged for their amazing achievements on Ekofisk.

The IOR prize for 2001 is given to an offshore pilot project that could not have been realized without a steady and continuous research over a long period, combined with a license willing to make the necessary decisions and take the necessary risks. And the winner is … the Microbial Enhanced Oil Recovery pilot on the Norne field.

For more than 10 years Egil Sunde has been one of the leading persons in the research for using bacteria to improve the oil production. Through laboratory work and pilots onshore in Austria, the method has matured in such a way that an offshore pilot was the obvious next step.

By now the Norwegian petroleum cluster has got some billion new members, feeding happily on nitrogen and phosphor and producing enzymes that makes it very difficult for the oil to cling to its hiding places.

Egil Sunde certainly deserves this award for his creative, patient and thorough work – believing in his method despite all scepticism and obstacles.

And he will share the award with the Norne license and the operator, Statoil. Last summer a microbial enhanced oil recovery pilot was started at the Norne field. But for the courage of the Norne license and the risk they was willing to take when engaging in a test pilot offshore, the method would not have been developed for use on the Norwegian continental shelf, and 5 million standard cubic metres of extra oil – which is the target of the project at Norne – might have missed its release from the rock formations.

There is every reason to be impressed with this project and its results. Resource management is a paramount concern in our petroleum policy, and improved oil recovery forms a vital part of the resource management.

So, it is a pleasure and an honour for me to present the IOR award for 2001 to Egil Sunde and to Ole Magne Drønen on behalf of the Norne licence.

Congratulations.

I wish you all the best in your further efforts and research achievements.