High activity on the Norwegian Continental Shelf, but still demanding conditions in the supply industry.

-In a period of turmoil and uncertainty due to the financial crisis the Norway’s oil and gas revenues have enabled actions to limit the effects on employment, trade and industry. The actions have lessened the impact of the financial crisis in Norway compared to several other countries. The high level of offshore activity is expected to be sustained also in the coming years. I will now start the work on a White Paper on petroleum policy. The White Paper will include all aspects of Norway’s largest industry and pave the way for stability in the years to come, says Terje Riis-Johansen, Minister of Petroleum and Energy.

- However, we still feel the effects from the financial crisis. The supply industry is reporting demanding conditions and lower rates of incoming orders. As a consequence, the government is working to secure a competitive supply industry, which contributes to industry development and employment all over the country, says Terje Riis-Johansen, Minister of Petroleum and Energy.

In the National Budget for 2010 (NB 2010) the average price of Norwegian crude oil is estimated at NOK 375/barrel for 2009, an upward adjustment of NOK 25/barrel compared to the Revised National Budget for 2009 (RNB 2009). In 2010 the average oil price is estimated at NOK 425/barrel, equivalent to about USD 70/barrel with a dollar exchange rate of NOK 6.

The oil price in 2009 increased from about USD 40/barrel at the beginning of the year to a level of USD 60 to 70 per barrel in the third quarter. The price increase is seen in connection with the cut in oil supplies from OPEC, upward revisions of economic growth forecasts and also developments in the financial markets.

With an improved economic outlook, oil demand is expected to grow into 2010. Together with continued constraints on OPEC production, this gives reasons to expect a tighter market balance and firmer oil prices next year.

The upward adjustment of the oil price contributes to an increase in the state net cash flow from the petroleum sector in 2009, but is partially outweighed by a lower price on gas. In NB 2010 the net cash flow is estimated to NOK 265 billion, an upward adjustment of NOK 3 billion compared to RNB2009. This constitutes about 26 percent of the state’s total income. Of the total cash flow, taxes and fees amount to NOK 171 billion, the net cash flow from the State Direct Financial Interest (SDFI) is at NOK 78 billion and dividend from Statoil is at NOK 15.5 billion. In 2010 the state net cash flow from the petroleum sector is estimated at NOK 220 billion.

Total oil production (including NGL* and condensate) is estimated at 2.3 million barrels per day in 2009, 7 per cent less than in 2008.  While the oil production is on a decline, the gas production is increasing. In 2009 the production of total saleable gas is expected to be about 103 billion standard cubic metres, an increase of about 7 per cent compared to 2008.

Despite the large uncertainty in the market last year, the activity level on the Norwegian Continental Shelf has been high. Including exploration costs, the total investments in 2009 are estimated at NOK 135 billion. This equals a volume growth of 7 per cent compared to 2008. We still expect a high level of activity in the following years.

The income generated from the petroleum industry has provided Norway with a considerable financial wealth. By the end of June 2009 the market value of the Government Pensiond Fond – Global was approximately NOK 2 385 billion. The petroleum industry also accounts for a large part of Norwegian exports; the export value of crude oil, natural gas and pipeline transport services is expected to be close to NOK 422 billion in 2009.

The total recoverable resources at the Norwegian Continental Shelf amount to approximately 13.4 billion standard cubic meters oil equivalents. Since the start-up of the oil activities in Norway roughly 38 per cent of these resources have been produced. About one fourth are still not proven. Exploration activity and focus on enhanced recovery from existing fields will be decisive to realize the potential from the Norwegian resource base. Today 54 per cent of our total recoverable oil resources are produced, while only 22 per cent of the gas resources are produced.

*NGL= Natural Gas Liquids