High oil prices result in record-level income for the Norwegian State

- The decrease in oil production is more than offset by the high oil prices and increasing gas production. The result is an expected increase in the State’s net cash flow from the petroleum sector of about NOK 100 billion this year. The ever-increasing investements show that the activity level on the Norwegian continental shelf is still high, says Terje Riis Johansen, Minister of Petroleum and Energy.

The State’s net cash flow from the petroleum sector is estimated at NOK 425 billion in 2008. Out of the total cash flow taxes and fees constitute NOK 247 billion, the net cash flow from the State’s direct financial interest (SDFI) is at NOK 161 billion and dividend from StatoilHydro is at NOK 17 billion.

The net cash flow this year constitutes about 36 per cent of the State’s total income, which is an increase of about NOK 109 billion, or 35 per cent, from 2007. Compared to the Revised National Budget for 2008 (RNB 2008) the estimated net cash flow for 2008 has been increased by NOK 69 billion. This is due to higher oil price expectations, which more than offset the reduced production estimates. The net cash flow in 2009 is expected at NOK 407 billion.

In the National Budget for 2009 (NB 2009) the average price of Norwegian crude oil is estimated at NOK 585/barrel this year and NOK 500/barrel in 2009. This is a considerable adjustment upward compared to the RNB 2008. During the last year the oil price has fluctuated remarkably, and there is a considerable uncertainty regarding the future price development. A reduction in economic growth worldwide combined with high oil prices have contributed to the slowing down of the demand growth for oil this year. On the other hand, there is still little spare capacity and uncertainty regarding the supply of oil from several major producing countries. Production restraints from the OPEC countries will also have an impact on the development of the oil price.

Since the start-up of the oil activities in Norway we have produced roughly one third of the expected recoverable petroleum resources. We have produced a considerably larger amount of oil than gas. As of today, approximately half of the total expected oil resources have been produced. The remaining resources are mainly connected to existing fields, or they have yet to be discovered. A strong focus on existing fields and on exploration is crucial to ensure a long-term development on the Norwegian continental shelf.

Total oil production (including NGL* and condensate) is estimated at 2,4 million barrels per day in 2008. This is slightly lower than the 2007 production figure. The oil production is expected to be quite stable in the next few years, before a gradual decline is expected in the years thereafter.

The gas production on the Norwegian shelf is in a continual state of growth.
The gas sales in 2008 are estimated at 96 billion cubic metres (bcm), which is about 7 per cent higher than in 2007. In 2009 the gas sales are expected to increase to about 106 bcm. This growth is expected to continue in the following years.

In 2008 the petroleum investments (including exploration costs) are expected at NOK 127 billion. This is a volume growth of about 11 per cent compared to 2007. The investments are estimated at NOK 137 billion in 2009 and are expected to remain at a high level in the next few years.

*NGL = Natural Gas Liquids