Foils from the speech.

Dear participants,

It is a pleasure for me to open the 3rd OG 21 Forum here today at the University of Oslo.

It is rewarding to see how the petroleum industry in Norway has embraced the OG21 strategy initiative, and that so many people are taking an active interest in this important event - the OG21 Forum. With the revision of the strategy now in place, OG 21 has confirmed its place as a key instrument in national petroleum research and development.

Long term global challenge
To set the scene for my presentation, I have decided to start with a global view of the energy and petroleum future. According to long term business as usual forecasts made by the International Energy Agency, the share of oil and gas in world energy mix is expected to rise from around 55 % today to about 60 % in 2030.

If the world energy demand is to increase by the same rate as in the previous 30 years, more than 100 million barrels per day of new oil production is needed by 2030 in order to replace existing production, and at the same time meet the projected demand growth.

This future represents a major opportunity for the long term value creation in the oil and gas industry, but it also represents a major environmental challenge. According to the IEA, the world's in place deposits of oil and gas is in principle sufficient. New technology will, however, play a major role in ensuring that the large remaining potential of conventional and un-conventional resources of oil & gas can be made available at reasonable costs and in a sustainable manner. Petroleum research and development will therefore be very important.

Furthermore, even if the world is successful in increasing the use of renewable energy sources considerably, we will still be dependent on fossil fuels for the foreseeable future. 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 new government.

…and large potential and possibilities on the NCS
Let me turn to the activities on the Norwegian Continental Shelf (NCS). The resources on the NCS represent long term value creation opportunities for the industry. As can be seen from the slide, the realization of this potential depends on improvements within several areas such as;
1) success within exploration, 2) more cost effective developments, this is in particular important in relation to deep water and arctic conditions, 3) enhanced recovery and 4) environmentally acceptable solutions.

The large possibilities mean high ambitions for the value creation from our resources. Recently, the Norwegian Petroleum Directorate launched an ambition to realize additional 5 billion barrels of oil equivalents by 2015, as marked by the vertical line in the slide. This is a very ambitious goal.

Research and development of new technologies will play a key role both in meeting the challenges we are facing and in reaching the goal set by the Petroleum Directorate.

Technology pays off
Over the years, investments in research and technology has paid off significantly in terms of higher oil and gas production, enhanced recoveries, reduced costs and higher income. We have gone from large concrete structures via floating systems to subsea solutions and multiphase flow. The importance of research and technology in the future should not be underestimated, especially when we look at the diverse nature of challenges the industry faces in ensuring value creation from future NCS activities.

Long term future in theArctic
The oil and gas resources in the Arctic represent a long term opportunity for the Norwegian and international oil and gas industry. According to the US Geological Survey as much as 25 % of the world's undiscovered resources may be located in the Arctic.

Our activities in the Barents Sea and the Norwegian Sea such as the Snøvhit and Ormen Lange Developments represent a valuable experience for taking part in the future arctic activities. The ability to safely develop resources in a demanding arctic climate remote from infrastructure and markets, and with no harmful effects to the environment, pose demanding challenges for the industry. Research and development of new technology will be one of several important factors that are needed to efficiently meet these challenges.

Ambitious goal for enhanced recovery
An increasing number of NCS fields, such as in the North Sea are maturing. Here, extension of field life and tail end production become important activities for long term value creation. Enhanced recovery is a major improvement factor in this respect.

As the slide shows, the industry achieved a significant increase in the recovery rate during the 90ies. After a flattening of the curve during the low oil prices experienced some years ago, there is now considerable optimism. Several operators of mature fields on the NCS have set ambitious targets for their fields, and the Norwegian Petroleum Directorate has established a new long term goal of 55 % for the average recovery rate on the NCS. These ambitions will require substantial new efforts within research, technology development and use of new technology.

...supported by different possibilities
As the slide shows, there are several options of various mediums that can be injected into oil reservoirs to enhance recovery. These options vary in terms of their competitiveness regarding cost and effects on recovery.

Carbon dioxide has attracted stronger attention recently as an EOR opportunity. As can be seen from the slide, this option is a possibility, but according to a recent IEA study, it is more expensive than alternative and more established ways of enhancing oil recovery. Nevertheless, using CO2 is a method that should be actively pursued in the future. Not least since CO2 is a major contributor to climate change and that using this gas could limit emissions of CO2 to atmosphere.

OG 21 – An unique collaboration for value creation
Let me then turn to OG 21 and the background for today's Forum.

I am pleased to see how OG 21 is a unique arena for collaboration within the oil and gas cluster. The OG 21 initiative has ensured that R&D efforts are focused on the most relevant areas to secure future value creation from the petroleum sector. This is very clear from the revised OG 21 strategy, where the major value creation opportunities from exploration, development and production are high on the agenda. We have trough the OG 21 approach managed to create a holistic and focused petroleum research and development effort in Norway, with participation by all relevant players in the joint efforts.

OG 21 Implementation in 2006
It is important that all parties involved are fully committed to the implementation of OG 21.

The Government will increase the expenditure on petroleum related research by NOK 100 million in the state budget for 2006, resulting in a total of approximately NOK 400 mill. This will generate substantial additional investments in the industry and will contribute further to the implementation of the OG 21 ambitions. It is an important step towards reaching the target of an annual public funding of NOK 600 million to petroleum R&D that is established by OG21.

The industry is the major investor in research and technology in the oil and gas sector. In light of the challenges we face with regard to our future activities on the NCS, it is important with a continued commitment to research and technology within industry. I trust the industry is seriously pursuing its role as champions for research and technology also in the future.

… with the Petromaks programme
Government support has been an important tool in the development of a competitive and competent petroleum related industry. Today such support for petroleum R&D is mainly organized through two programmes in the Research Council of Norway, PETROMAKS and Demo 2000. As far as possible, these programmes will put into effect the strategy drawn up by the OG21.

PETROMAKS serves as an umbrella for most of the petroleum related research supported by the Norwegian Research Council. This large programme covers both long-term basic research and applied research, resulting in the development of new competence as well as innovation.

… and Demo 2000 programme
Demo 2000 is a project related technology development program. The objectives of the program are to improve the competitiveness of the national offshore industry and contribute to continuing profitable development of the resources on the NCS by supporting suitable pilots.

During the first 5 years of the program 280 million kroner has been allocated to Demo 2000 over the Government's budgets. This, together with financing from the relevant companies and institutions, and support from the oil companies, has resulted in more than 100 projects of the total value of NOK 1200 million. Furthermore, pilot projects funded by the Demo 2000 programme have resulted in commercial sales of new technologies.

The Ministry is pleased with the work the Norwegian Research Council and its programme secretariats are undertaking with the PETROMAKS and Demo 2000 programmes. Both programmes are performing well. Demo 2000 is currently undergoing an independent review and we are looking forward to seeing the results of this. Both programmes are keys to our petroleum research and development effort and the ministry places considerable emphasis on ensuring their success.

A strong Government commitment to research
The new Government’s inauguration declaration draws up the main features of the Government’s commitment to research and competence on a national basis. In general research and development within sectors where Norway has a comparative advantage and a great potential of value creation, such as the oil and gas sector, are areas of commitment for the Government.

A priority is to increase the commitment to basic research and user driven research. Furthermore, the Government seeks to facilitate increased exchange of scientists with other countries. I will also emphasise the importance of environmental research. Such efforts are essential if Norway is to remain world leading as an environmentally friendly energy producer.

… and stronger basic knowledge
Due to the relatively low recruitment to scientific subjects recent years, it is a particular ambition to increase the level of competence within this field. Strengthened commitments to basic competence within science, mathematics and physics are needed to maintain a sufficient level of competence for the future petroleum industry.

The new Government makes substantial investments in education and research. It is proposed to allocate NOK 1.6 billion to implementing the Knowledge Promotion Reform in 2006.

The Government is making a significant investment in research on a general basis, and suggests a total increase in allocations to this field of NOK 1.3 billion. In addition the Government proposes to increase the capital in the Fund for Research and Innovation by NOK 14 billion to NOK 50 billion.

A global leader
Global leadership within our areas of excellence is a major achievement resulting from the efforts we have made to build internationally recognized competence within our industry from the activities on the NCS. This leadership represent a major potential for value creation in our industry far beyond the activities on the NCS. The ambition in the supply and service industry is to reach 80 billion NOK sales of offshore related goods and services by 2010.

OG 21 global technology excellence
OG 21 is also important with regard to the globalization of Norwegian offshore technology.

OG 21 has therefore also a responsibility to assist in developing further the global excellence of our industry. This potential is largely a consequence of our efforts in increasing the value creation on the NCS, but needs to be focused further in light of global needs as well as the competitive edge of our industrial and scientific capabilities in Norway.

Strengthening the Norwegian petroleum research community towards assuming a global technology hub position in certain areas is a long term possibility OG 21 through its Technology Target Areas is well placed to pursue. I look forward to OG 21's further follow up in this respect.

It has been said about Norway that this is the only place where all major players from the oil industry, the supply industry, research institutions, universities and governments can convene in the same effort to define a collective way forward for research and technology.

I think there is a lot of merit to this observation, and I do think OG 21 will be an important instrument for strengthening value creation and our national competitiveness for the future. With these words I am pleased to set the stage for the following dialogue that will take place during this OG 21 Forum, and I look forward to following OG 21 in the future.

Thank you for your attention.