Foils (in pdf format)

Your Excellencies,
It is a pleasure for me to open today's session (after having listened to two highly interesting lectures yesterday evening).

The international community is in an extremely difficult and important period of time. We firmly believe that Norway's prime contribution is to continue petroleum production and supply at current levels, thus contributing to making the oil market as stable as possible under present conditions.

Without diminishing the seriousness of the international situation - I want to leave the following messages: The importance of the Norwegian Continental Shelf is more apparent than ever. The production of oil and gas is significant and the Norwegian Continental Shelf still represents promising prospects and interesting opportunities. It offers predictability and stability in framework conditions, and an internationally competitive petroleum cluster with world class technology.

I strongly believe that our current policy will ensure that we meet the long term development target put forward in the last White Paper on oil and gas policies.

I am convinced that the opportunities Norway represents as a petroleum province will continue to make us competitive in a global context.

The Norwegian Continental Shelf
The international oil and gas industry is a dynamic industry highly affected by global changes in the political and economic environment, as well as by new business strategies. It is of paramount importance to me, as minister of petroleum and energy, to understand and take into account these changes to keep Norwegian oil and gas policy updated.

Through our framework conditions, we are committed to maintaining an attractive investment climate on the Norwegian Continental Shelf. Over the last years, a number of adjustments have been made in order to further increase predictability as regards to new production licences, to attract new companies, and to improve and simplify procedures.

On framework issues we will continue our close dialogue with the industry. We are of course always open for suggestions and recommendations on how we can further improve our system. At the same time, I would like to challenge industry players to identify cost drivers where industry itself has a potential of improving.

On the Norwegian Continental Shelf we have - broadly speaking - two main challenges:

• We must access and exploit resources that are increasingly difficult to reach, and
• We must work to increase the recovery rate in producing fields.

This morning I will spend most of my time on increased recovery rates and technological issues, but let me first comment on our current exploration initiatives.

Exploration Issues
The way I see it, the Norwegian Continental Shelf - and the Norwegian Sea in particular - is still among the most promising and interesting petroleum provinces in the world. However, during the last two or three years we have seen some high profile frontier exploration wells render disappointing results - in the Norwegian Sea in particular. Compared to what we have grown used to in the past, the number of exploration wells may decline in the coming years.

Thus, it is a clear goal for the government to increase exploration activity on the Norwegian Continental Shelf:

• The Government discussed the awards in the North Sea Awards 2002 on the 27 ^th> of March. Formal awards will be made before Easter. In addition, we are aiming to implement the so called "open door" system in mature areas later this year, with awards this autumn.
• In frontier areas we will continue the policy of licensing rounds every second year. Our first opportunity to give access to new exploration acreage is the 18 ^th> Licensing Round. We aim to announce this round before Christmas this year, enabling awards before summer 2004. The Government will see to it that the 18 ^th> Licensing Round responds to the need of the industry for new, attractive frontier acreage. Previous years' exploration results will be taken into consideration in deciding the size and scope of the round.
• Areas outside Lofoten, in particular the so-called Nordland VI-area, have for some time been very high on the priority list for many companies. However, before deciding on including acreage in the Nordland VI-area in the 18 ^th> Licensing Round, we will have to await the outcome of the ongoing impact assessment study of year round petroleum activity in the area Lofoten-Barents Sea.

Recovery rate/Technological Issues
Let me then turn to my main topic today: Increased recovery rates and technological issues.

Over the 30 years we have had petroleum activities on the Norwegian Continental Shelf, companies have learnt to work jointly to continuously increase recovery rates. The Norwegian Continental Shelf offers tremendous challenges due to a harsh offshore environment in Atlantic and Polar regions. Deep water, difficult weather conditions and remoteness from coastal infrastructure are all part of making the NCS one of the most demanding petroleum provinces in the world. In spite of large discoveries and very prolific reservoirs, cost of development has been a challenge.

Development and application of new technology has been a key factor in enabling economic development and competitive production, making it possible to build up Norwegian petroleum production to the current 3,4 million bbl/d (including NGL and condensate), making us the sixth largest producer and the third largest exporter of oil in the world. Development and application of new technology has also made the petroleum sector the most important industry in Norway, accounting for some 23% of our gross national product. Income from the sector is of course of great value to the nation and the Norwegian economy.

In addition, building our offshore capabilities has also entailed the development of national oil companies and a large contracting and supply industry. Today, some 200 000 people are directly or indirectly involved in the Norwegian petroleum sector.

Let me give you just a few examples of what I think places Norwegian contractors and suppliers in the forefront of technology development in the international oil and gas industry.

Subsea industry
Clearly, the Norwegian subsea cluster is worth highlighting in this connection. Investments in research and development, in addition to frame contracts between Norwegian operators and subsea suppliers, have been important drivers for the emerging of a Norwegian subsea industry. The result of this can be seen today, where three out of the four leading subsea systems suppliers, together with a large supplier chain of companies, come from Norway. These companies are today world leaders in subsea technology.

Light Well Intervention
The newly developed "Light Well Intervention" system, to have its first field operation at the NCS in these days, has the potential of increasing the oil recovery from the subsea wells substantially. By making intervention easier the recovery rates can be brought up to the same as that for dry wells, implying a huge income potential for field owners. Norwegian companies have played a leading role in developing this technology.

Thin Oil Zones
The drive to reduce exploration costs has given important achievements. In the field of seismics, Norwegian companies were pioneers in innovative streamer vessels, software and data management, reducing cost of new seismics by a factor of 5 and making 3D seismics economically feasible. Advanced, high-resolution seismics has resulted in another exciting technology: high precision geo-steering of horizontal wells, reaching highly challenging targets such as thin oil zones, turning for instance the thought-to-be sub-marginal Troll oil zone prospect into one of the largest oil fields on the Norwegian Continental Shelf.

Deeper waters – Floaters
Large scale application of floating production combined with subsea wells represents another technology leap, reducing break-even costs for new developments on the NCS down towards the 10 $/bbl mark.

Future development of a Norwegian Petroleum Cluster
A competitive petroleum cluster in Norway is a prerequisite for cost efficient exploitation of NCS resources. The important question at this stage is how to stay competitive, i.e. how to develop and find new solutions in an ever more demanding and globalised setting. I am a strong believer in the necessity of a continuous development of the Norwegian based petroleum cluster, and I intend to contribute to such a development.

There is one aspect, however, I think we all have to bear in mind. One of the major implications of globalisation is the increasing level of specialisation and division of labour. This trend is taking place within most industries, including the petroleum sector, meaning that neither nations nor individual companies can excel in all kinds of industrial activity. We must accept the fact that comparative advantages changes as an industry evolves and matures. Hence, we cannot expect the Norwegian petroleum industry to sustain its competitive edge in all parts of the value chain. The Norwegian petroleum industry must be prepared to adapt to structural changes and a shifting business climate.

In my opinion, the ability to respond to these trends in a pro-active manner is the key to maintain a strong petroleum cluster in Norway.

KonKraft
The Konkraft, or Competitiveness, initiative was launched in 1998/99 to address new challenges facing the Norwegian oil and gas industry following the fall in oil prices and the global restructuring in the E&P business. A forum for top executives, the so called Top Leader Forum, was established in 2000. This forum includes about 30 leaders from oil companies, suppliers, trade unions, research institutions and government bodies, including the Ministry of Finance and the Ministry of Environment. As minister of petroleum and energy, I am chairing this Forum.

The mandate of the Forum is to identify and initiate projects to strengthen the competitiveness of both the Norwegian Continental Shelf and the oil and gas industry. Various projects have been launched and actions taken, for instance related to the rig market, access to capital and marginal fields, as well as the interactions between oil companies and the supply and service industries. The Forum is also monitoring established initiatives within research, internationalisation, safety and environment. Two new areas where industry has initiated projects are concerning the NCS activity level and the tax system. I am looking forward to a dialogue with the industry based on the results we expect to see from these projects.

Research & Development
A whole range of factors need to be addressed, if we are to sustain our competitiveness.

The one factor standing out with particular importance, however, is research and development. Technology is identified by industry itself as the single most important factor for cost reductions and increased value added.

OG21 Vision and Main Areas
Last year, the Ministry of Petroleum and Energy, based on recommendations from and in cooperation with the industry, established a new technology forum, the OG21 initiative, "Oil and Gas in the 21st century". This initiative aims at setting the priorities for research within the petroleum sector, covering the whole value chain from basic research, to applied research and development, and into testing and commercialisation of technology.

OG21, with representation from the oil companies, the supply industry and the research institutions, has identified five broad areas of priority; deep water, environment, increased recovery, small fields and the gas value chain.

Within these 5 broader areas, nine specific technology targets have been defined. Each target area has a so-called Lead Party, that is, an oil company responsible for defining technology gaps and needs, and for defining and carrying out projects in cooperation with other industry parties and research institutions. All the major operators on the Norwegian Continental Shelf are Lead Parties for one or two defined areas.

The development and introduction of new technology takes time, vision and brave ambitions and, not least, the willingness to do real field testing. I would use this opportuniny to encourage the oil companies to actively pursue the OG21 processes, to have an open mind towards new technology cases and applications and, where required, contribute to testing and qualification of new pilots.

Conclusion
In concluding, I would like to emphasis my political ambition to maintain and develop the attractiveness of the Norwegian Continental Shelf in a global context. An important contribution to this is to ensure stable, but flexible, framework conditions, including important elements like the licensing policy, emphasis on improved technologies and increased recovery and through an effective and innovative petroleum cluster based in Norway, as I hope I have outlined here this morning.

Thank you for your attention.