First of all I will thank you for inviting me to discuss some energy issues of mutual interest.

Norway has been a stable and reliable supplier of oil and gas to the EU since the early 70'ies, and will continue to be so for a long time into the future. Some highlights regarding our petroleum activities are:

• Norway is the third largest exporter of crude oil in the world. Norway’s market share is estimated to be approximately 15 % of the EU oil demand.
• 14 % of all the gas consumed in Europe today is produced on our Continental Shelf. Production and export of gas is expected to rise in the short to medium term and a sales level of 120 BCM a year to the EU is a possible scenario within this decade. This makes Norway an essential indigenous supplier to the European gas market.
• Norway holds approximately 50% of the remaining oil and gas resources in Western Europe. We have so far only produced approximately 29 % of the total resources on the Norwegian Continental Shelf. There is also a large potential for new resources to be developed. Realizing the resource potential on the NCS means that we will have oil production for more than fifty years and gas production in an even longer perspective, and that Norway will be a long term supplier of oil and gas to meet growing energy demands.

Building our offshore capabilities has entailed the development of a large petroleum industry. Research and application of new technologies have been key factors in enabling economic development and competitive production from the Norwegian Continental Shelf. This has resulted in an internationally competitive petroleum industry with world class technology.

I will now address some special features concerning theBarents Sea.
The increasing importance of the Barents Sea and the Arctic in general as areas for future energy activities and supplies is being recognised by a wide audience. These areas are possibly the next large petroleum province. The USGS, for instance, has publicly stated that as much as 25% of the world's remaining petroleum resources are to be found in the Arctic. This figure may be too high, but in any case, large resources may be located in the Arctic.

My concern is to establish a sustainable energy agenda for the north, as this may prove to be the new petroleum province of Europe and become important with regard to security of supply.

We have over the past 20 years drilled 61 wells in the Barents Sea without any accidents, and the first major development - the Snøhvit LNG field - is now under development. In the Russian part of the Barents Sea large interest is connected to a possible development of the Stockman field.

Moving into new frontier areas is attracting attention from many stakeholders. The angles of approach to the Arctic are however very different, often leaving mixed signals questioning the acceptability of petroleum activities in the Arctic. I for one, think it has been proven possible to have large scale petroleum activities in the Arctic in a manner that is environmentally acceptable and in line with sustainable development criteria. This is backed by recent studies, but more studies and R&D efforts are required. In this respect it is important that we establish a sustainable energy agenda for the Arctic.

R & D
Under the EEA Agreement, Norway is taking part as a full member of the sixth Framework Programme of the European Community for research, technological development and demonstration activities. In light of the need for enhanced energy security and the growing role of hydrocarbons in European and global energy supply - the EU Framework Programme should give emphasize to oil and gas technology and research in its future priorities.

At the same time the CO2 challenge has to be dealt with. A stronger focus on R & D in the EU related to more efficient extraction of hydrocarbons will be important to realise carbon capture and storage option as well as to make more energy supplies available.

I hope the EU in its further priorities recognize that stronger R & D support related to these technologies is important to fulfil its overall energy and environmental challenges

Norway is the world's sixth largest hydropower producer. Norway is also Europe's leading producer of electricity based on renewable energy sources, with an annual production of about 118 Terawatt hours. This equivalent to one third of the total production of electricity from renewable energy sources in EU-15.

Of the total hydropower potential about 35 Terawatt hours per year has been protected against development due to environmental concerns. Upgrading and extension of existing, old plants may yield increased production. We now aim to develop the significant potential for small-scale hydropower plants.

Norway has a large unutilized renewable energy potential from various sources. Nearest to a full commercial breakthrough are wind power and bio energy, while abundant tidal and wave power holds promises for the future. Norway’s wind resources are especially large along the coast and in Northern Norway. The high wind velocity and the large open areas in Norway make wind power particularly favourable for production of renewable electricity. The existing hydro electric power system could handle the natural fluctuations in wind power production, even in the case of a very substantial development of wind power.

To continue our promotion of renewables we are now considering the possibility of forming a joint market for mandatory electricity certificates with Sweden from 2007.

The Nordic power market is arguably among Europe’s best integrated regional markets. This allows for effective use of power generation assets throughout the Nordic area. The substantial hydropower component gives flexibility to accommodate Danish wind power production and cover peak loads. Nuclear and thermal power provides important base load.

The strong integration of the Nordic market also means that the Nordic countries share common challenges in the area of security of supply. There is a net power deficit in the Nordic area as a whole in average years. Our reliance on imports is strongly aggravated in dry years. This points to the need for improving the balance between production and consumption to reduce volatility in the market and serious strains on the system in exceptional years. In this context we appreciate the focus on security of electricity supply in the EU through the new directive. I also support the less interventionist outlook given to this directive in the Council and European Parliament, whereby the importance of market mechanisms is underlined.

I also think that a comprehensive strategy for energy efficiency is an important tool for improving security of electricity supply. In 2001 Norway established a national agency, Enova, to promote both energy efficiency and renewables. Enova has a contract with the Ministry to achieve our national target of 12 Terawatt hours per year in energy savings and new renewable production by 2010. One of our main goals is to make Norwegian energy supply less dependent on hydropower and electricity, as we aim for a marked reduction in energy use. We welcome the attention given to these matters by the EU through the proposed directive on energy efficiency and energy services. Regarding the ongoing discussion on binding or indicative targets in the directive, I think that the approach based on indicative targets favoured by the Council is sensible.

We are through the EEA agreement (European Economic Area agreement) a part of the internal energy market. Norway is integrated as regards legislation, but also in physical terms through oil, gas and electricity. It is therefore of utmost importance for us in our position as non member of the EU to be well informed about how policies and directives are being shaped through the Council and the EP and having ample opportunity to voice views in the different processes.