Foils from the speech in pdf

Ladies and gentlemen
It is a pleasure to be in Haugesund. It is my first visit to Sildajazz, oil and gas symposium which i understand is an annual event organised by Vetco Aibel. A lot of competence and experience is gathered in this room and I look forward to share my thoughts with you.

It is important for me to emphasize the huge potential that lies within the petroleum sector in Norway. Our large resource base and the technology and competence in the industry are our most important assets.

For this Government it is important that we further develop value creation, employment and competence in the Norwegian petroleum sector. Our ambition is for Norway to lead in technology and environmental performance. Realizing these goals is also dependent on efforts, innovation and activity from the industry and I hope that the government and the industry will work towards these goals together.

Allow me to share with you some reflections regarding the Norwegian Continental Shelf and the petroleum industry. But first a few words on the global energy situation.

The IEA World Energy Outlook 2005 reference scenario predicts a 52 per cent rise in global energy demand in 2030 compared to 2003. Two thirds of this increase is due to increasing energy demand in developing countries.

The world will, for the foreseeable future, continue to depend on fossil fuels. The share of fossil fuels in the total energy mix is predicted to be relatively constant over the period. Wind and solar will experience the strongest growth, but their share will still be marginal in 2030. Gas is becoming increasingly important and will overtake coal as the second most important source of energy, after oil.

The world has enough oil resources to supply the demand by 2030. However, the supply of conventional oil from non-OPEC will reach a plateau around 2010-2015. Non-conventional oil, and more importantly, OPEC, will have to secure the world’s oil demand in the future. The timing of investment is becoming increasingly important as spare capacity is limited. More investment in new oil fields and refineries is needed to meet future global energy demand.

Let me turn to the Norwegian Continental Shelf. The Norwegian Continental Shelf has a large resource base that is still not developed and produced. Only about a third of our resources has been produced. New discoveries are necessary in order to secure long-term value creation.

During the last couple of years there has been a high focus on giving the industry access to acreage. Out of all acreage awarded on the NCS since 1965 40% has been awarded the last 6 years. In December 2005 I awarded the largest round ever on the NCS (APA 2005), measured in number of licenses.

In addition to the APA 2005 I awarded 13 licenses in the 19th licensing round earlier this year. The awards in the 19th round were concentrated in the least known parts of the NCS, namely the deep-water areas in the Norwegian Sea and the Barents Sea. We need substantial exploration activity in these areas to unveil the true petroleum potential.

With regard to the Barents Sea the 19th round and the integrated management plan have created predictability and a foundation for long term development of this region. The licenses that have been awarded in the Barents Sea are key-blocks that can give important information about larger areas.

All in all this Government has followed up the industry's need for exploration acreage. Today it is not so much access to exploration acreage or interest from the international oil-companies that are the limiting factors to the exploration activity, but rather access to drilling rigs. Access to rigs is unfortunately a situation that will continue to be difficult in coming years. Most countries in the world are facing this challenge. To a large extent the rig situation is a market issue about supply and demand that the Government has limited influence over. We do however see that the oil-companies are forming rig-consortiums to face this challenge. This is positive and has resulted in some more rigs coming into the NCS.

With regard to the exploration activity on the NCS in general, I think the coming years will show an improvement. In 2005 only 12 exploration wells were drilled on the NCS. So far this year we are already at this level and we expect somewhere between 20 and 25 exploration wells drilled by the end of the year.

There has been a lot of focus on the high north recently. We believe that the Barents Sea could represent a new petroleum province in Europe. However, the Barents Sea is by far the least explored part of the Norwegian Continental Shelf. Only 63 exploration wells have been drilled in this area. Two commercial discoveries have been made as you well know – the Snøhvit gas field and the Goliat oil field. The encouraging discoveries at the Goliat oil field have confirmed that there are more resources to be found in the Barents Sea. But more exploration needs to be done to prove the resources.

Norway and Russia share the Barents Sea. We have an active dialogue with Russia.I strongly believe that a fundamental aspect of the energy dialogue is to promote co-operation between Russian and Norwegian oil and gas companies and supply industry. Activities in the Barents Sea, the Pechora Sea and the Sakhalin offshore developments offer ample opportunities for a constructive co-operation between Russian and Norwegian companies.

To prepare for activities in the ice infested waters industry needs to be active in research and development to prepare for a more challenging working environment remote from infrastructure and markets. I will revert to research and technology later in my presentation.

The Barents Sea is described by many as the cleanest ocean in the world. This must be preserved. Value creation in the Barents Sea must therefore take place in such a manner as to ensure the good co-existence between the different users of the sea and the environment and under strict rules of safety and environmental protection.

Access to exploration acreage is not enough to sustain the activity level on the NCS, and to ensure the petroleum industry's future. We have to focus on extending lifetime and increasing the petroleum recovery from existing oil and gas fields.

This figure shows the distribution of resources for fields in production on the Norwegian shelf. The yellow bars represent the volumes already produced, the red the remaining reserves, whereas the green bars represent the volumes that, based on current plans, will be left in the ground when the field shuts down permanently. As you can see, the green volumes are substantial. We should aim at producing as much of these resources as possible. It is one of this Government’s main goals for the Norwegian petroleum activity that we should extract as much petroleum as possible from existing fields. To achieve this, several measures need to be made. First and foremost, the licensees must invest in projects for increased recovery. New technology development will be a vital factor to realise increased oil recovery in the years to come. Further technological development may contribute to lower costs and higher earnings through increased recovery from fields already in production.

Besides the added value from increased recovery, measures for increased recovery will extend a field’s lifetime and keep infrastructure in place, thereby increasing the opportunities for tie-in of new discoveries.

The activity level on the Norwegian shelf is high. There are currently several ongoing developments, of which Snøhvit and Ormen Lange are the largest. Both will start producing next year. Snøhvit represents a new era in the Norwegian petroleum history, as the first petroleum development in the Barents Sea, as well as the first large-scale LNG facility in Europe. Ormen Lange may be seen as an ambassador for the significance of technology development, as cutting-edge technology has been employed in the development of the field.

Another important ongoing development is Alvheim – as you are very well aware of Vetco Aibel is currently upgrading the Alvheim production ship, making it ready for production start in the beginning of next year. Vilje, Volve, Blane and Enoch are other fields under development.

Activity will remain high in coming years: We expect to receive plans for development and operation for Gjøa, Skarv, Camilla/Belinda, Alve and Volund in the next five months, and more PDO’s are being planned for submittal in 2007.

As mentioned in my introduction our petroleum industry with its competence and technology together with our resource base is our most important asset.

I am very pleased to see that the industry also succeeds internationally. During the last decade, the Norwegian petroleum industry has managed to conquer market positions in nearly all major open petroleum provinces in the world.

In 2003 sales of goods and services abroad was 35 billion NOK. A target of 50 billion NOK in sales in 2005 was then set. SNF has just completed a study for the MPE where they conclude that this target of 50 billion NOK in sales of goods and services abroad in 2005 was met. This is remarkable when activity in the home market has never been higher. A significant trend is that turnover from geographically distant regions is increasing considerably.

In 2005 Southeast-Asia and Australia were the largest market for the Norwegian petroleum industry, with a market share of 22% in 2005.

The UK was in 2005 still the most important market for the majority of the companies and almost half of the companies have the UK as their main export region. However the UK/North Sea continue a decline to 21% in 2005.

Another important market for the Norwegian petroleum industry is the US/Canada region. Although this region experienced a little increase in absolute turnover in 2005, the relative turnover decreased to 16% in 2005. Lastly I will mention that the industry quadrupled their turnover in the Mediterranean/North-Africa from 2003 to 2005.

In order to stay competitive it is important that both the companies and the Government have a focus on technology, competence and education.

Over the years, investment in R&D has paid off significantly. When we look at the diverse nature of challenges the industry faces in ensuring value creation from future NCS activities, the importance of research and technology should not be underestimated. The Government has a high focus on R&D in the oil and gas sector.

Further, an important ambition for the Government is to increase the level of competence within the scientific subjects in schools. Strengthened commitments to basic competence within science, mathematics and physics are needed to maintain a competitive future oil and gas industry. The Government makes substantial investments in education and research in order to reach the ambition of competitive industry also in the future. In 2006 the Government allocated increased funds of about 400 million NOK to petroleum research. The Government’s contribution to R & D is mainly channelled thorough the programmes Petromaks and DEMO2000.

Government’s research is largely organised in two research programmes. These programmes are intended to contribute to attaining the goals set in the national technology strategy OG21. The strategy’s main priorities are environmental technology, enhanced recovery, exploration and reservoir characterisation, subsea processing and transport. Petromaks serves as an umbrella for most of the petroleum related research supported by the Research Council. This large programme covers both long-term basic research and applied research, resulting in the development of new competence as well as new technology.

The DEMO2000’s objective is to contribute to faster market introduction of new petroleum technology. Recent evaluation of DEMO2000 proved very positive which makes it easy for continued support of DEMO2000.

The challenges posed by climate change are global and as already mentioned, for the foreseeable future we will be dependent on fossil fuels. Therefore, the petroleum industry has to engage in research and development to make carbon capture and storage a viable option. This is one of the main priorities of the Government and the aims are to:

• Cooperate with the industry on realizing capture of CO2 at gas fired power plants as soon as possible.
• The process of realizing a CO2 capture-facility at the Kårstø gas fired power plant.
• Establish a value chain for transportation and injection of CO2.

The Government has initiated three projects and 80 million NOK has been allocated to this work in 2006.

An exciting project in this respect is the Just Catch Project. Together with ten partners Gassnova and AkerKværner invests NOK 32 million in the Just Catch Project. The main goal of the project is to further develop a viable solution to capture and store CO2. There will be extensive pilot testing in the project. The project will run for two years and form the basis for a final investment decision. The environmental friendly technology can be implemented for gas power plants within 2010. The technology may also be applied for coal fired power plants and other industrial CO2 sources.

Let me conclude:
We will see a continued high activity level on the Norwegian shelf in coming years. It is important for the government to maintain and further develop employment and competence in the petroleum sector. Our aim is for Norway to be a world leader in technology and environmental performance. I am confident that the industry will successfully apply its technology and competence on the NCS and abroad.

Thank you for your attention.