Ladies and Gentlemen,
It is a pleasure to be in Stavanger and address you here today. The ONS is an outstanding venue for sharing knowledge, information and and experience.

The oil and gas business is Norway’s largest industry in terms of value creation. For that reason, developments on the Norwegian Continental Shelf (NCS) are significant for Norwegian economy and industrial growth.

The petroleum industry in Norway has every opportunity to continue the positive development in the decades to come.

With regard to the resource base, Norway alone has a potential for another 50 years of oil production, and gas for 100 years. This is quite exceptional for any industry, and illustrates that the petroleum activities is far from a sunset activity.

However, discovering and producing our remaining reserves requires significant efforts and substantial investments. New projects must be profitable to be developed, and our industry must be competitive to stay in business. This will require comprehensive efforts and wise decisions both by industry and the Government.

Two Scenarios
The NCS faces several possible development scenarios. These depend on such factors as oil prices – structural changes in the global and regional oil and gas sector, new technologies and environmental considerations. However, realisation of the different scenarios also depends on the actions of the authorities and the oil and gas industry. In this respect, I would like to consider two possible development scenarios for future oil and gas production on the NCS.

The lower curve implies production declining towards 2020, when oil output virtually ceases. This covers anticipated output from projects presently in production and from projects approved for development. This is termed the erosion scenario.

In the other scenario, production is maintained at a substantially higher level. This long-term scenario involves the realisation of profitable projects that ensure production of oil for at least 50 years and gas in a century-long perspective.

The Government’s clear objective is to achieve the long-term scenario.

The erosion scenario illustrates a trend in operations on the NCS where the authorities and the industry, or rather the Norwegian society at large, rest content with what has been achieved till now and only reap returns from known projects. In such situation, Norway’s petroleum sector would stagnate over the next 10-20 years.

This would result in a dramatic reduction both in Government income, and in the overall value creation from the petroleum sector. Important economic spin-offs to other related industries, such as the maritime sector and the information and communication industries, would also fade away. A trend of this kind would further make internationalisation of our petroleum industry very difficult, as its home base would erode. Eventually, the Norwegian society as such would be deprived of opportunities for increased and long-term wealth.

The Government will not allow this to happen.

Achieving the long-term scenario will, however, be very demanding. This is partly due to the fact that the most readily accessible resources on the NCS have been developed, and recovering those that are less accessible will be increasingly challenging. That job rests primarily with the oil and gas industry, but the resource potential of the NCS will not be fully realised without the Government's pursuing an aggressive policy to continue developing the Norwegian petroleum sector in a sustainable manner.

Unwillingness on our part to make a commitment to the petroleum sector now will be unfavourable to the Norwegian community in the future. We are at a crossroads, and we must make a choice. To the Government, the right course is to pursue the more demanding but also more rewarding long-term scenario. In the following, I will point at three main challenges and preconditions for reaching our goal:

• The public image of the petroleum sector
• The need for contineud coexistence with fisheries interests and environmental concernes
• Research for and development of new technologies for exploration and development

How to achieve the long-term scenario?

1. Reputation/Image
The first challenge I would like to point to is related to the apparent lack of knowledge, interest and public debate concerning oil and gas issues in the Norwegian society in general. I know for a fact that the media, the public and some of our parliamentarians' view on oil and gas issues are ranging from cool indifference to slight negativism. To the extent this sector provokes any reactions, they are often of a negative character, mostly describing a perception of the industry as filthy both in general, and in terms of the environment. This is surprising.

This perception contrasts strongly with the overall importance and the benefits that the oil and gas industry has provided, and will provide, for the Norwegian society over a long period of time. Not least, it contrasts with the huge possibilities associated with this industry for decades to come. The oil and gas industry is a cornerstone of the Norwegian society and economy today. Finally, it contrasts with the record of this industry to combine economic activity with due consideration for the environment. Despite this, few seem to be interested in debating the future for this industry with a positive point of departure.

We should all join forces to insert a more positive view on the sector in public perception. This is a sector benefiting the Norwegian society at large, and this should be reflected in how it is perceived. Let me point to one challenge in particular – the young generation.

A great concern to me is the lack of interest in science and mathematics amongst our young. This is also reflected in the low recruitment to petroleum-related education at a higher level. The future of this sector depends on the interest of the coming generation. In order to attain the long-term scenario, we need creativity, brains and enthusiasm in the oil and gas sector. In other words – we need to convince the younger generation that it is worth investing in petroleum-related education. There are vast opportunities in the oil and gas industry throughout and beyond their lifetimes.

It should be possible to make the petroleum sector more attractive to young people, when pointing to some interesting characteristics of this industry.

First, the petroleum sector is the most intensive industry in Norway in terms of information and communication technology. It is getting increasingly knowledge-based and provides exciting opportunities.

Second, the petroleum industry is also increasingly international in its nature. For those seeking challenges in an international sphere, there are ample opportunities for interesting careers throughout the world.

Third, the petroleum industry is getting more and more diversified in terms of career opportunities. There is a need for different kinds of expertise – from engineers to social anthropologists. This diversification should constitute attractive and interesting possibilities for the young people of today.

Our clear aim should be to communicate these prospects to the next generation. To make use of the catchphrase from ONS: We need to "energise the new generation"! This task is one that I give to myself, my fellow politicians, and the oil and gas industry in the coming years.

2. Coexistence/environmental challenges
The second major challenge I would like to address, relates to the need for continued coexsistence between the petroleum sector, the fisheries interests and environmental concerns.

Let me first remind you of one important fact: Even though we put large efforts into developing renewable energy sources, fossil fuels will continue to be the main source of energy in the world for decades to come.

Therefore we must make sure that we are able to produce and develop our oil and gas sources in a sustainable manner. To me, sustainable development in this setting means ensuring that the petroleum activities continue to be carried out in coexistence with other industries such as the fisheries, and that environmental concerns are duly taken into account.

The basic philosophy behind our oil and gas policies since the commencement of our petroleum activities can be summarised in one word: Coexistence. In other words, we have never been willing to put at risk our environment or our fisheries, and I think this principle is well illustrated by the manner in which the petroleum activities on the Norwegian Continental Shelf has been carried out for the last 30 years.

The authorities have an important role in setting up environmental and other requirements for the industry to comply with. We are continually evaluating whether these requirements are satisfactory. This is especially true at a time when the oil and gas industry is facing new environmental challenges related to exploration and production of petroleum.

Thus, the heterogeneous nature of the Norwegian Continental Shelf represents different environmental challenges. In the North Sea, maturing fields result in increased amounts of produced water. This calls for new and innovative technological solutions.

As petroleum activities are moving further north and into coastal areas, there is the ever present need to balance the interest of the petroleum sector with other industries, such as fisheries, and to preserve the environment.

This is utterly important as we see the Shelf maturing. It seems that remaining prospective areas are near the coastline of Norway or in areas rich in fish resources. It will be a challenge in the future to be able to explore for, and eventually produce oil and gas in remaining prospective areas in a sustainable manner.

A solid knowledge base is key to meeting these new challenges and will be decisive for good management of our petroleum resources in the future. The Government has recently initiated an impact assessment of carrying out petroleum activities on an year-round basis in the area covering Lofoten and the Barents Sea. I am certain that this will ensure a solid basis for sustainable petroleum activities in our northern waters.

Together with the industry, the Government has also launched a research program to provide more knowledge on long term effects of discharges to the sea from petroleum activities.

This also underlines the importance of co-operation between the industry and the authorities. The strategy of zero discharge to the sea of environmentally harmful substances provides an example of the way Norwegian authorities and the industry have jointly succeeded in integrating environmental concerns in petroleum operations. I will see to it that this co-operation is further developed.

On the whole, I experience a willingness in industry to act responsibly and co-operate with the Government on environmental issues. This is important. In order to achieve a sustainable and environmentally sound management of our oil and gas resources, it is of course also vital that the Government continues to provide a framework for sustainable oil and gas activities through its oil and gas policies.

As a general point, I am optimistic that technological advances will contribute to good solutions to many of our environmental challenges. This leads me to the third challenge I want to address today: The need for a coherent national policy for Research and Technology Development.

3. Technology
Obviously, the long term scenario I have shown you represents a unique potential for value creation on the Norwegian Continental Shelf.

However, this scenario can only materialise if we are willing to invest in the appropriate technological solutions. And, indeed, there are plenty of areas that we need to address. Let me mention some concrete examples:

• Small fields
• Improved recovery
• Deep water
• Environmental protection

As the Norwegian Continental Shelf is maturing, we have to concentrate on finding new solutions to small fields developments. As a rule, small fields are technically complex and require a different technology and business approach than large fields. Still, they may hold a substantial value potential that should not be left untapped.

As for our larger fields, and the giants in particular, many are about to come off production plateau. Thus, we also need to improve recovery rates. The average recovery factor has now levelled out at around 44 per cent for oil fields after having increased gradually in the last years. The objective, however, is to attain an average factor of 50 per cent. For gas we aim at 75 per cent. This is must be a priority. But reaching these targets imply the use of technology that is not yet available. It also demands the vision and creativity of the licensees to continue the struggle for increasing the recovery rate.

As our petroleum activities are moving north, we will encounter an increasingly demanding environment for offshore operations. The combination of a harsher climate and deeper waters requires that new and innovative concepts for exploration and production are developed.

Technological development is also a crucial part of solving the environmental challenges we are facing. Many of the technical solutions that have been developed are improving the economic performance as well as bringing substantial environmental gains. It is important to promote and encourage further technology development that has this dual effect. In this respect, sound policies are needed to facilitate research and technology development.

In co-operation with the industry and the Norwegian Research Council, the Ministry of Petroleum and Energy is now aiming at establishing a national strategy for research and development for oil and gas in the 21 ^st> century, termed OG21. In August last year, a permanent organisation for OG21 was set up to develop a national strategy reflecting our main challenges.

By exploiting the cluster dynamics, OG21 represents a stronger and more unified system for R&D, including demonstration and commercialisation of new products.

It is a clear ambition that new technologies developed in Norway also should be made available to the international market. In this way, the industry can create new and diversified business opportunities. Moreover, it can bring back new know-how to benefit operations on the Norwegian Continental Shelf. Thus, internationalisation is essential in reaching our long-term goal.

KonKraft
In 1998 the drop in the oil price resulted in a remarkable restructuring in the oil and gas industry. All of a sudden the consequences of globalisation became very apparent and dramatic. Combined with a maturing Norwegian Continental Shelf, this created a need to respond to the challenges on a broader basis

Thus, the Norwegian-based oil and gas sector and the Ministry of Petroleum initiated a dialogue, in which all parts of the petroleum industry are participating. The aim is to strengthen the competitiveness of the NCS and the industry and to contribute to internationalisation of the Norwegian supply industry. This process is known as KonKraft.

An important aspect of the work of KonKraft is to create a long-term vision for the industry, which reflects the long-term development perspective for this sector. Further, KonKraft is working to identify and implement measures which support that vision.

As pointed out in the preceding session, KonKraft has been a driving force in enhancing cross border co-operation with the United Kingdom. Let me express my great appreciation of the work that the KonKraft process has achieved so far.

Conclusion
The Government intends to plan for sustained value creation and the realisation of the long-term scenario. We have a long-term approach in our policy making. As you can all see behind me on the wall, the potential is very good.

As I mentioned in my opening remarks, Norway is now at a crossroads, and we must make a choice. The choice itself is an easy one, but the results are hard to achieve.

We have to bear in mind that the gains of succeeding are exceptional - we simply cannot afford to miss this opportunity. The Government will work to make it materialise. This requires hard work and a good interplay with the industry, which must be the key player and driving force.

Thank you very much for your attention.