"Norwegian technology - good for business".

Seminar held in Perth 30 March 1998.

Statement by State Secretary Mrs Harriet Berg.

(1. Introduction.)

Premier Honorable Richard Court, Excellencies, Ladies and Gentlemen,

It is indeed a pleasure to join in welcoming you to this seminar, focusing on the many promising possibilities for extended cooperation between Norway and Australia in the arena of advanced oil and gas technology. It is a true honour for me to address you at this meeting in the presence of so many distinguished representatives from both the business communities and the authorities of our two countries.

The theme of my statement is "Norwegian technology - good for business". As I am not an engineer myself, I will leave the technical details safely in the hands of others. As a representative of the new Norwegian Government I would therefore like to take this opportunity to place this seminar in the larger context of bilateral economic relations between Norway and Australia, as well as in the context of Norway's economic situation and current challenges in our trade and industrial policy.

(2. Norway's economy)

Let me start by giving you a quick glance at the current economic situation in Norway.

Looking at the big picture, Norway is in a fortunate position. We have no foreign debt, our currency is stable, and we have a comfortable surplus in our national budget. The inflation rate is around 2%, unemployment is around 4%, and the interest rate is around 5%. Almost all economic indicators point in the right direction.

Norway is blessed with abundant natural resources. The exploitation of these natural resources has led to technological advances in a number of areas where Norwegian companies are considered to be among the world leaders. Today, applied information technology and telecommunications are Norway's fastest growing business sectors.

Being a small country, openness to international trade has been crucial for the development of our economy and for securing our prosperity. Norway now exports nearly half the goods and services we produce, and we import nearly half of what we consume. With less than one thousandth of the world's population, we control around 1 per cent of world trade and 10 per cent of the world's ocean going fleet, and Norway ranks as the world's second largest oil exporter.

The fact that Norway's economy is in good shape does not mean, however, that our future is free of any challenges. Far from it. Let me mention some of the most important issues we are facing in our industrial and trade policy.

(3. Industrial policy issues.)

Due to our dependency on income from the petroleum sector, we need to strengthen our land-based economy. We know that our petroleum resources will run dry one day. We have to prepare for that day by improving the chances for the other sectors of our economy to develop and prosper.

A very important part of the Government's industrial strategy is to focus on small and medium-sized companies. They represent the bedrock of our economy. They are of vital importance in terms of employment, national income and in terms of maintaining the viability of rural districts and regions. We are therefore developing measures that will make it easier to establish and to run businesses, for instance by reducing bureaucratic paperwork.

Another challenge is related to the rapid technological changes taking place. Knowledge will probably be a much more crucial production factor than labour, raw materials or capital in the future. The ability to adapt to new challenges and to be in the technological forefront will probably be more decisive than ever before. Those businesses and countries that are able to meet these challenges will be the winners of the future. Norway wants to be among these winners.

In order to meet this objective, the Norwegian government seeks to stimulate the process of innovation in companies, for instance by encouraging co-operation with the universities and the research community. By strengthening our educational system and by funding research and development, we want to keep Norway at the vanguard of technological development in the coming decades. We are also focusing efforts on the development of and use of information technology in the Norwegian industry.

Many of the Norwegian offshore companies present here today are precisely small and medium sized companies. They are technological advanced, with a proven record of innovation and ability to adopt to market needs.

The last major challenge is related to the increasing globalisation of the world economy. As a small nation, we have to pursue an active trade policy aimed at gaining access to important markets and securing a system of equal and fair conditions for international trade. In addition the Government can lend support to companies that have limited capabilities to meet this challenge, not least small and medium-sized companies, by offering information and advice, and by stimulating the creation of networks and alliances. And we can ensure that adequate financial instruments are in place.

(4. Trade policy issues)

As a member of the European Economic Area, Norway is fully integrated in the European internal market. Since the EU countries account for around three-quarters of Norway's foreign trade, full access to this market is of vital importance.

Through the EEA Agreement we are as much a part of the Single market as any EU member state. The agreement enables Norwegian companies to compete with companies from EU coutnries on equal terms both in the EU and in Norway. The EEA Agreement covers the four freedoms: Free movement of capital, goods, services, and people. Moreover, EU's legislation governing the Internal Market is applied in Norway in the same manner as in the 15 EU member states. The dymanic nature of the agreement means that new EU legislation can be incorporateed into Norwegian law. For an Australian investor interested in investing in Norway he meets the same regulatory framework as in any of the EU countries.

Currently, we are facing three main challenges in this context: The EU enlargement with possible new member countries from Central and Eastern Europe; the establishment of the European Economic and Monetary Union (EMU) and a new EU plan of action for the internal market.

Similarly, the World Trade Organization is of vital importance to Norway because it provides a multilateral framework ensuring that the same rules apply for all countries - whether big or small. The Norwegian Government hopes that the upcoming Ministerial Conference in the WTO in May will adopt a working plan that could ease the beginning of a new round of negotiations starting in 1999/2000. A new round should further improve market access for goods and strengthen the multilateral trading system in general. Furthermore, Norway gives high priority to the issue of extending the General Agreement on Trade in Services to include shipping as well.

Our efforts to secure fair competition and market access through multilateral instruments must be supplemented by efforts to promote exports and investments abroad. While the individual companies must carry the primary responsibility for their market operations, the authorities have a role to play in supporting their efforts, in particular in new growth markets. This is the rationale behind the development of policy instruments like the Government's Asia plan.

(5. The Strategic Plan for Asia)

I take it that Australians will have no problem in accepting that we have taken the liberty to include Australia as one of the priority markets under the umbrella of the Norwegian Government's Asia plan.

The Plan is based on the recognition that Asia is becoming a new centre of gravity in the world economy, as well as in the global community in general, regardless of current economic fluctuations. Our approach is guided by the vision that trade and economic relations with Asia should be increased in order to stimulate growth and sustainable development in Norway, as well as in the partner countries in Asia. A concept of partnership is embedded in the vision, as economic relations are a matter of mutual benefit. Furthermore, the vision includes the principle of sustainable development as a guiding principle, reflecting the need for a long-term perspective, beyond our own generation.

Another basic feature of our Strategic Plan for Asia is its integrated nature: Our relations with Asian countries should be regarded as a whole, not as a matter of trade and economics alone. Economic relations should be reinforced by a close political dialogue. They should be nurtured by actions to promote an understanding of our different cultures, and by educational, scientific and other forms of contact which allow our people to work together.

(Financial turmoil in Asia)

In this period of financial turmoil in Asia the question is sometimes asked whether Norway's active approach to Asia should be reconsidered in view of the apparently higher risks involved. Our answer can be found in the long-term nature of our presence in Asia, and in the fundamental character of Norwegian products' competitiveness in international markets.

Very few of Norway's exports are short-lived fashion articles. On the contrary, most of our presence in international markets is in areas where we compete on the basis of the merits of our technology and our natural resources. Furthermore, Norwegian goods and services are often essential elements in vital and highly complex production processes where long-term reliability is essential.

We believe that this is the time to demonstrate commitment to the region. The Government will, for its part, continue to support the development of political, cultural and commercial relations with Asia. We believe that our seriousness and commitment in the present climate of economic uncertainty in large parts of Asia, eventually will be rewarded.

(6. Norwegian technology. Offshore.)

This long-term approach is in particular relevant in the context of today's seminar. Let me therefore turn to the issue of Norwegian offshore petroleum technology.

Norway is currently the sixth largest producer of oil in the world, and the second largest exporter. We are also a significant exporter of natural gas to Europe, delivering more than 10 percent of total gas demand in the EU. In the coming decade, gas exports will increase substantially under existing contractual committments.

The total petroleum production of Norway is divided into three categories:

• NGL (Natural Gas Liquids)
• Gas
• Oil

of which NGL represents a modest part.

• The total production in 1997 amounted to almost 240 million standard cubic metres oil equivalents (scm oe).
• For 1997, the daily rate of oil production on the Norwegian Continental shelf was about 3,1 million barrels.
• At present rates of production, Norway's remaining discovered oil resources will last for about 14 years. The equivalent figure for gas is roughly 80 years.
• As you can see from this illustration/transparency, total petroleum production is expected to decline after the turn of the century. This is primarily due to the decrease of oil production. However, gas production is expected to increase. Thus, Norway will still have a substantial petroleum production well into the next century.
• Almost the total of the petroleum production of Norway is exported. Only a minor proportion, about 7% , of the oil production is kept for domestic use. For that reason the illustration/transparency shown here is indicative for Norwegian petroleum exports as well.

Norway has developed a competitive petroleum industry which prospers both nationally and internationally. Technological achievements and new forms of cooperation have both contributed substantially in this respect. The so-called NORSOK initiative has played an important role in this context. NORSOK was launched in 1993 as a joint initiative between the oil companies the supply industry and the authorities aiming at improving productivity and value creation in connection with development projects. This has to a large extent been achieved by rationalising working methods and procurement procedures, as well as by cutting red tape.

In order to strengthen the position of the Norwegian Petroleum Industry internationally, the government has in cooperation with the industry established a foundation called INTSOK. Among the founders are the Norwegian oil companies Statoil, Saga and Norsk Hydro, The Ministry of Foreign Affairs, the Ministry of Trade and Industry, the Ministry of Petroleum and Energy, and The Federation of Norwegian Engineering Industries (TBL). I am sure that you already have taken note of the fact that INTSOK is one of the co-organisers of today's seminar.

(Similarities between Norway and Australia)

The offshore petroleum history of Norway and Australia clearly indicates that we have a lot of experience to share. These experiences should represent an excellent basis for a joint development of offshore expertise in the future. This is a major aim of this seminar. It is not about Norwegian companies coming to Australia to show how offshore developments are to be done. It is about stimulating cooperation and partnerships between companies from our two countries for the benefit of both.

The first petroleum discoveries offshore were made in the 1960s, both in Australia and in Norway. In Australia, the Barracouta oil and gas field in Bass Strait was discovered in 1965 while production started in 1969. In Norway, the first discovery was made in 1967, while production commenced in 1971.

There exist a number of similarities between Norway and Australia set by nature, which represents an excellent basis which should facilitate the accomodation to local conditions.These include:

• Water depth. Offshore petroleum exploration and development activities in the Norwegian sector of the North Sea occured over the first couple of decades at water depths up to 150 meters, comparable to the situation offshore Western Australia and the Northern Territory until recent years. Lately, offshore activities in Norway have moved, in stages, to increasingly deeper waters. Now, 1200 meters have been reached. In Australia there is also a move toward deep water fields, as shown by Laminaria, some of the Gorgon gas fields and Scarborough.
• Climatic conditions. There are no tropical cyclones in Norwegian waters. There are, nevertheless, very harsh climatic conditions such as strong winds, high waves and low temperatures.
• Geology. The geological structures present in the area from the Carnarvon Basin in Western Australia to the Arfura Sea off the northern coast of the Northern Territory are similar to those found in Norwegian waters.

These physical conditions, shared by our two countries, have had a decisive impact on the development of technological solutions enabling Norwegian offshore expertise to compete internationally. The result has been a large number of high quality and cost effective solutions that can be of considerable benefit to offshore development projects in Australia. Examples include subsea installations and deep water technology.

(7. Norway and Australia.)

Recent developments demonstrate that advanced Norwegian technology is good for business. A number of Norwegian and Norwegian-related offshore companies have already a local presence here in Western Australia. These include large EPC contractors such as Kværner Oil & Gas, Aker and ABB Oil, Gas and Petrochemicals, seismic survey companies such as PGS and Nopec, and drilling companies such as Smedvig Technologies. Other companies rapidly expanding their presence in the offshore sector in Australia include DNV, CorrOcean, Petrotech Knowledge and Jotun.

For the companies already established in Perth, there is a margin for further growth in cooperation with local partners. However, I believe there is also room for more companies to follow suit, both for providers of products and services, and for exploration and development companies. Some of the companies in this category are present here today.

Let me also add that your openness and casual way of being is highly appreciated by Norwegian offshore petroleum companies already established in Perth. In particular, the easy access to information has impressed quite a few. Documentation is very well presented, and the extensive use of the Internet substantially facilitates life for companies aiming at establishing a local presence. The access to key persons at a ministerial level also makes conditions attractive from a newcomer's point of view.

(Trade in products and services)

As for total trade, there has been a positive and fairly rapid development of the trade relations between Norway and Australia over the last few years, even though it is still rather marginal for both of us. Obviously more can be done. The potential for a further increase of trade in products and services and for diversifying our economic relations into industrial cooperation and investments is apparent.

Increased cooperation in the oil and gas sector should improve both industrial and trading relations. The build-up of the Australian offshore competence through cooperation with Norway may in itself in due course strengthen the Australian competitiveness in other markets. Norway's position as a net capital exporter and important institutional investor on the world scene may also have some future bearing on relations with Australia. Investments are trade-generating and may as such be an additional tool to develop trade between us.

I will also emphasise that Norwegian shipping is an importing service provider to Australia, in value terms probably four times more important than trade in traditional goods. The Norwegian merchant fleet - the third largest in the world - in fact lifts some 6-7% of Australia's foreign commodity trade. Companies such as Wilhelmsen, Jebsens and Western Bulk Carriers - to mention some - have been established here over many years, in fact in many generations in the case of Wilhelmsen. Norwegian shipping and the broader maritime experience was a core factor in the development of products and services to the operators in the North Sea. Norwegian shipping may also have an important role to play in offshore activities in Australian waters. This is already apparent through the presence of Norwegian supply vessels.

Finally, it should be duly noted that there are no major problems in our bilateral economic relations. Both Governments are eager, I am sure, to do their utmost to stimulate closer commercial cooperation.

(8. Conclusion)

In summary, Norwegian technology is good for business for a number of reasons. Firstly, technological solutions are developed under conditions similar to those encountered in Australia. Therefore they can represent high quality, cost effective solutions in this part of the world as well. Secondly, a parallell history of offshore petroleum development and human aspects facilitate closer cooperation between companies in our two countries. Thirdly, such cooperation will enable both the Norwegian and Australian offshore sector to excel in a competitive international environment.

With these words, I express my sincere belief that this seminar will help us to explore and identify new opportunities for cooperation between our oil and gas industries, resulting in an even broader and deeper industrial partnership between Australia and Norway.

Ladies and Gentlemen,

Thank you for your attention.