Speech at the World Petroleum Congress 2000

Ladies and Gentlemen,
It is a great pleasure for me to speak at this reception. Since I am addressing an international audience I would very much like to say some words on the Norwegian Continental Shelf and the Norwegian Petroleum Policy.

Although Norway is a young oil nation and small in size compared to Canada, our petroleum resources have enabled us to become an important player internationally - both as an exporter of oil and gas and as a provider of petroleum related goods and services.

The NCS
Exploration for hydrocarbons offshore Norway started some 35 years ago in the North Sea. Approx. 60% of the total shelf area has been opened for exploration. Areas that are environmentally sensitive and/or entail potential conflicts of interest with the fisheries are as a rule not open.

Like the offshore environment of Canada, Norway is characterised by rough weather conditions along the entire coastline, particularly during the fall and winter seasons. In the northern Barents Sea, drifting ice represents a challenge. In addition there are areas that are very vulnerable with regard to the marine life. These are challenges not unknown to the Canadian offshore provinces, I presume.

The Norwegian Petroleum Resources
After some 30 years of production, the Norwegian resource base is still quite comfortable. Ultimate recoverable resources are estimated to be more than 83 bboe.

So far, we have only produced one third of the expected oil resources, and only 10% of the gas resources. While parts of the Norwegian shelf are maturing, major size discoveries are still made, particularly in the Norwegian Sea.

Oil and Gas Production
Today, Norwegian oil production is exceeding 3 mbd. Norway is the world’s seventh largest oil producer and ranks as the second or third largest oil exporter after Saudi Arabia. The Norwegian share of world production is 4,5%.

Norwegian gas production - excluding reinjected gas – is expected to increase from a current annual production level of ca. 1620 bill Scf to a plateau of just below 2520 bill scf in 2005. This increase is necessary to fulfil gas sales contracts with Europe. Based on the expected recoverable gas resources, Norway will be able to produce at this level for more than 80 years. Norwegian gas accounts for about 12% of Europe's gas consumption.

Oil production is expected to reach its peak in a few years. However, it should be mentioned that there is a huge potential for improved oil recovery. Improved knowledge about the fields, along with the development and employment of new technology, form the basis of improved oil recovery. The expected recovery factors has increased steadily on the Norwegian Continental Shelf (NCS) now being at an average of 44% which is high compared to all other provinces in the world.

I am pleased to say that Norsk Hydro has played an important role with regard to improved oil recovery measures. One outstanding example is the Troll field that quite recently was considered a gas field with an unproducable oil layer.

Due to the stubbornness and technical skill of Norsk Hydro the Troll field is now producing 250.000 bpd. of oil. We expect that oil representing 32 billion USD will be produced from this field.

Norsk Hydro has also been the driving force behind the first full scale subsea separation pilot, which was installed on the Troll field during summer 1999 and has so far proven to be a success. There are also tentative plans for a future pilot to test downhole separation. This has the potential of radically improving oil recovery and shaping a different pattern of future field developments in that conventional platforms may be rendered obsolete.

Even if Norwegian oil production will peak in a few years time, there is much to play for. A mature basin in the North Sea offers a variety of opportunities for those with the capabilities to grasp them Sea. And the Norwegian Sea offers immature areas where challenges are plentiful.

The petroleum activities in Norway have a long term perspective. It is a consensus that our policies are based on the following:

Petroleum resources shall give highest possible value creation and ensure welfare and employment.

Combine the role of a big energy producer whilst safeguarding the environment.

Support the internationalisation of our oil industry.

As a consequence of these policies, I will here only highlight three elements:

The role of the state in our sector

The competitiveness of the Norwegian Shelf

Internationalisation of the petroleum industry

Norwegian petroleum activities have been characterised by a substantial and dominant role for the state. We have a state oil company with 100% government ownership, and the state has through the instrument of the State Direct Financial Interest (SDFI) control of bout 40% of the total petroleum activities in Norway.

We are presently considering changes in this system. We discuss limited privatisation of Statoil up to 25-30%. We also discuss commercialisation of parts of the State's interest. There is not full agreement about the question of privatisation in my party, the Labour Party. There is neither full agreement on the extent to which the State interest should be commercialised.

These matters will be discussed in the party and decided upon in the Convention in November this year. After this, the Government will present a Proposal to the Parliament on the issue. I am fairly confident that the process will result in a partly privatisation of Statoil as well as a partly commercialisation of the State interest.

The Competitiveness of the Norwegian Shelf
The number of petroleum provinces open to international oil companies is increasing. This is a challenge to Norway. We have to offer the international companies conditions that continue to attract the best resources for the petroleum activities in Norway.

We have very recently issued a White Paper that underlines the willingness and interest of the Government to simplify procedures and regulations, which in our mind would enhance the competitiveness of the Norwegian Shelf.

We also have a committee evaluating the tax system. This being said I would also stress that we are very eager to create an atmosphere of co-operation between the Government, the oil companies and the supply industry. In a short time there will be established a high level group consisting of these parties and headed by the Minister of Petroleum. This group shall discuss all aspects related to the petroleum activities with the aim to agree on strategies and solutions that are sustainable for all parties.

Questions regarding the framework conditions, technology, working processes, environment, etc will be subject to discussions in the group.

Internationalisation
It is a Government priority to maintain a stable level of activity on the NCS sufficient to support a sustainable industry – also beyond the duration of our petroleum resources. It is therefore a prerequisite that Norwegian oil and gas companies, suppliers and contractors are able to compete internationally.

Thus, our industry can contribute to sustaining employment and revenues, but also acquire experience and skills that are fundamental for upgrading the national pool of human capital.

We also believe that other countries can benefit from the Norwegian involvement abroad. Norwegian oil companies and suppliers make good partners in that they contribute to local industry development by means of technology exchange, transfer of experience and business partnerships. In this respect, Canada stands out as en excellent partner, with whom we do not only share technological challenges but also the same values and outlook on matters of mutual interest. It is no coincidence that Norway and Canada are partners also on a political level: in the United Nations and Nato for instance.

It is encouraging to see that Norwegian companies are holding leading positions internationally in key technology areas such as floating production, and subsea production systems, which seem to be widely applicable offshore East Canada.

The combination of a strong home base with the exposure to fierce international competition has no doubt contributed to sharpening their competitive edge in these areas.

However, we cannot take it for granted that Norway will remain a strong home base. One of the major challenges to be handled by all Governments is to maintain and further develop its country's industry base. Faced with liberalised capital markets and a globalise world economy this is no easy task. The competitive pressure is increasing, and it is not evident that yesterday's winners will be the winners of tomorrow.

The room for Government intervention seems to diminish as the world economy grows more inter-related. This is a new challenge that will have bearings on us all, but we hardly have all the answers yet.

However, it appears that those companies that are internationally exposed, and have managed to take advantage of opportunities for exports and foreign direct investments, have improved their position.

To go international and to maintain the activity level domestically are therefore not conflicting, but mutually reinforcing objectives.

To conclude, I think there is good reason to be optimistic about the future.

First, there is a solid resource base on the NCS. These reserves will require new investments and industrial activity, albeit in different technology areas involving different players.

Second, the Norwegian oil and gas industry has demonstrated the will and capability to go international. With the Norwegian industry’s endeavours to find solutions to new challenges, I am confident that the recent advances in technology will prove successful, not only on the Norwegian Continental Shelf, but also elsewhere in the world.

In this respect, I believe that the co-operation between Canadian and Norwegian companies will prove mutually beneficial.

With these words, I wish to thank Norsk Hydro for hosting this luncheon, and I hope everybody present will have a fruitful stay in Calgary.

Thank you for your attention.