Foils (pdf format)

Ladies and gentlemen,
It is a pleasure to welcome you all to this event.

Houston has for a long time been a major business centre for international oil and gas industry. The US Gulf of Mexico is indeed a prospective petroleum province. Moreover, many of the multinational oil companies run their global operations from here. In order to be part of such a leading business centre, the Norwegian oil and gas industry has been increasing its presence Houston over the past years.

The Petroleum sector inNorway(2003)
As an introduction, I would like to share with you some key figures about the Norwegian petroleum sector. This is the single most important industry in Norway as seen from these macro-economic indicators. Let me mention that the sector made up 21 % of the Gross Domestic Product in 2004 and about 47 per cent of the total export value. I would like to bring to your attention that Norway has a potential for another 50 years of oil production, and gas for much longer.

The subject of my speech is LNG technologies -Norwayas a frontrunner.

How to realize the potential of offshore gas is a prime concern to many petroleum producing countries. The gas business has up to now been local, national or regional, limited by the reach of pipelines and the absence of a global market. In the next decades the gas business will be transformed into a truly global business. This could be illustrated with a few investment projections, made by the IEA in their 2004 years Investment Outlook.

Gas investment requirements 2003 – 2030.

• Cumulative investment in the natural gas supply chain over the projection period will be 2.7 trillion US dollars.
• North America alone will account for over a quarter of total investment in natural gas.
• By 2030, half of inter-regional gas trade is projected to be in the form of LNG.

No one claims that these figures will be precisely validated in thirty years time, but they definitely provide an indication of the potential for oil and gas companies, contractors and suppliers.

The main part of my remarks will concern Norway's role in the global gas markets, in particular the LNG market. Then I will give an example of how the Norwegian supplier and contracting industry are ready to face the challenges that the future LNG potential represents.

The Norwegian Gas Sector.
Norway has the second largest gas resources in Europe, after Russia, and is a major supplier of gas to the European markets.

Today, there are about 50 fields producing gas on the Norwegian Continental Shelf (NCS). In order to transport gas from field to market, we have developed one of the world’s most extensive offshore pipeline transportation systems. The system consists of about 4000 miles (6600 km) of offshore pipelines and two large gas processing plants, integrated into one network.

Europe is the main market for Norwegian gas. Today, Norwegian gas sales amount to 14 percent of the European gas consumption. Most of the gas from the NCS is sold on long term contracts. However, we expect that this share will decline as the gas markets in Europe continue to open up for competition and the short term markets for gas evolve further.

Norwegian Gas Resources
Because only 16 percent of the total resources have been produced so far, Norway will remain an important long-term supplier of gas.

We usually divide the NCS into three areas, with different degrees of maturity. The southernmost area, the North Sea, is the most resource-rich and developed area. Most of our producing fields are situated here.

In the Norwegian Sea and the Barents Sea farther north only about 1 percent of the expected gas resources are produced. These areas have the largest potential for new discoveries. Two major gas fields are being developed in the Norwegian Sea and the Barents Sea, Ormen Lange (gas reserves 14 tcf) and Snøhvit (gas reserves 7 tcf).

Norwegian Gas Sales
Norwegian consumption of gas is very limited. Thus about 99 percent of our gas is exported or used for gas injection.

Norway is today the third largest exporter of natural gas - behind Russia and Canada, but ahead of Algeria. We are also the third largest exporter of oil - behind Saudi Arabia and Russia, but ahead of Iran. Norwegian production of crude oil and liquids is about 3.3 million barrels per day.

In 2004, Norwegian supplies of gas amounted to about 7 billion cubic feet (bcf) pr. day. Gas supplies will increase rapidly in the years to come. Reaching a sales level of more than 11 bcf/day within 2010 is regarded as realistic. In addition, there will be gas produced for injection in these fields. The development of the fields Ormen Lange and Snøhvit will be important contributions to the increased gas sales.

Due to the proximity to the European markets, gas field developments in Norway have been based on pipeline transportation. This has been the most cost-efficient way of bringing gas from the NCS to Europe, also for gas from the Norwegian Sea located relatively far from the European end users. The newest pipeline to be developed, Langeled, from the Ormen Lange development to the east coast of the UK, has a total pipeline length of approximately 745 miles (1,200 km). This will be the world's longest subsea gas pipeline.

Snøhvit LNG
For gas fields located offshore in the Barents Sea in the northern part of Norway, LNG is the best economic solution. The Snøhvit field is currently under development. This is the first field development in Norway based on an LNG solution and the northernmost LNG development in the world located at 71 degrees north. (Prudhoe Bay is located at 70 degrees north). The development of Snøhvit is based on transportation by pipeline to a treatment plant onshore. From here gas will be transported by LNG carriers. The gas reserves in Snøhvit will allow production for more than 20 years.

The development of Snøhvit could provide a basis for further field developments based on LNG in the area, and Snøhvit is therefore important for further exploration activities in the Barents Sea. We hope that considerably more gas is to be found in this area. Norway will through our licensing policy award new acreages to make sure that the remaining gas potential is uncovered.

Gas production from Snøhvit is expected to be about 0,55 bcf/day. USA is a major market for Snøhvit gas (0,23 bcf/d), where the Norwegian company Statoil will be a main marketer of gas based on LNG. To gain access to the US market Statoil has acquired capacity at the Cove Point terminal in Maryland. We hope to become a significant supplier of LNG to the US. 1Long term, Statoil should be able to supply 10 billion cubic metres (353 bcf) to the US on an annual basis

Government principles for R&D
Technology development has been fundamental to the development of Norwegian petroleum resources as well building industry capacities.

Through targeted R&D efforts we have managed to overcome the many technological challenges and barriers on the NCS.

One of the major principles of the Norwegian Government has been to encourage links between the oil companies, supply industry and research institutions. Besides new technological solutions, this approach has brought several positive effects:

• R&D work through industrial co-operation has stimulated openness from oil companies towards the domestic industry.
• The oil companies have made their expertise available.
• Oil companies and suppliers have been working together to co-ordinate their R&D programs. Significant synergies have been obtained by developing technology in this manner.

I think this is a result of our ability and willingness to work in dynamic networks with international players. This has no doubt produced a strong petroleum cluster. Government funding has proven to be a catalyst in promoting co-operation between the various players.

I am happy to see that several US oil companies involved in exploration and production on the NCS also play an active part in our national strategy for enhanced R&D in the petroleum sector, OG 21. OG21 has started a process to identify technology gaps. Nine groups have been established to this effect. ExxonMobil and ConocoPhillips have taken lead positions regarding cost efficient drilling and emissions to the sea respectively.

Also ChevronTexaco takes an active part in the Norwegian R&D cluster, and several US contractors and service companies provide very valuable contributions to technology development in Norway.

US experience and competence have been and will always be vital for the oil and gas activities in Norway. New technologies developed on the NCS can also be of benefit to operations in the US and other markets.