Distinguished guests, ladies and gentlemen,
The theme of this year's ONS, appropriately captures the current challenges of the oil and gas industry. Bridging the energy gap - these few words bring to mind several dilemmas that one way or the other will have fundamental economic, environmental and geopolitical consequences.

The world's demand for energy has a potential to cause problems as well as solve problems.

Both production and consumption of energy have an impact on the environment. Consumption of fossil fuels is the largest source of greenhouse gas emissions. The increased demand for energy necessarily intensifies the environmental challenges that are facing us.

On the other hand, there are important reasons for welcoming the increase in energy consumption. Energy demand is expected to grow by more than 50 percent between now and 2030. In Africa less that ten per cent of the population has access to electricity – a situation that calls for both investments and careful environmental considerations. The main reason behind the growth in demand for energy so far is of course the economic growth in both China and India. Economic growth is a precondition to combat poverty and energy is needed to fuel economic growth in developing countries. Huge investments in new capacity are needed to meet this demand.

Therefore, providing enough energy for the world requires strengthened partnership b etween all stakeholders. Global resources should be sufficient to cover demand. The challenge for the oil industry and governments in the years to come is to ensure the security of supply of energy to an energy hungry world and at the same time work towards more environmentally friendly energy production and use.

Norway ' total resources amount to more than 80 billion barrels of oil equivalents. So far approximately one third of the estimated total resources on the Norwegian Continental Shelf have been produced, one third are reserves and the remaining third are still undiscovered.

The world's third largest exporter of oil and gas
As the world's third largest exporter of oil and gas, Norway can indeed play a small but important role in the global energy picture. I would like to highlight some areas where Norway can contribute in bridging the energy gap.

Firstly, a competent industry providing technology and capital is a prerequisite for exploiting the resources. As many leading petroleum provinces are maturing, the technological, environmental and commercial complexity is growing.

It is the industry that has to do the job and I am pleased that we have an industry in Norway that is ready to take on new and demanding tasks – be it on the Norwegian Continental Shelf or in the global marketplace. D uring the past decade, the Norwegian petroleum industry has managed to conquer market positions in petroleum provinces all over the world. This is remarkable as the activity level in our home market has never been higher.

Making new discoveries through exploration is another way Norway can contribute in meeting the worlds energy demand. With one third of the resource base estimated to be undiscovered, access to acreage is the most important condition for materialising the full petroleum potential on the Norwegian Continental Shelf. There has been a sharp increase in access to acreage on the Norwegian Shelf during the last couple of years.

It is however a challenge for the industry to drill all their prospects at a desirable pace with the current lack of access to drilling rigs. I will continue to emphasise access to prospective acreage for the industry, but it is at the same time important that the companies have time and capacity to absorb the acreage made available to them.

Traditionally we have had very good experience with a step-wise exploration approach in frontier parts of the Shelf. This approach requires information from existing production licenses in an area before new licenses are awarded. In other words it is important that the petroleum industry has time to undertake their work-obligations in existing licenses before new licenses in the same area are awarded. In my evaluation of the 20 ^th> licensing round, I will emphasise a balance between the industry's need for additional acreage and the need for new information about an area before additional awards can be made. In more mature areas where the geology is better known it is important to ensure that time-sensitive resources are made available to the industry. This aspect is well taken care of in the system with awards in predefined areas.

According to some estimates almost one fourth of the undiscovered resources may be located in the Arctic. However, in these areas a good co-existence between the different users of the sea and the environment is essential. Strict rules of safety and environmental protection are essential.

Barents Sea
The Barents Sea is the least explored area on the Norwegian Continental Shelf. This year, the government launched an Integrated Management Plan for the Barents Sea and the sea areas off the Lofoten Islands. The plan establishes an ecosystem-based management of the natural resources and facilitates the co-existence of different users of the sea. The government has put in place what we think is a good framework for a long-term and sustainable development of this important petroleum province.

The resource potential in the Norwegian part of the Barents Sea is very promising. The petroleum activity can play an important role in regional development in the Northern parts of Norway. Co-operation between Norwegian and Russian industry will be decisive for the future development of the Barents Sea.

Bridging the energy gap is not only a matter of providing new acreage; it is also a matter of producing our natural resources as efficiently as possible. In this respect, the Norwegian Petroleum Directorate has set a new ambitious target for the next ten-year period, that I strongly support: "5 billion barrels of extra oil reserves within 2015". This equals almost one Statfjord field. If we are to attain this goal, all participants in the industry must contribute. Looking at all the small and larger projects planned for the future, I believe we are on the right track to achieving this goal.

Enhanced oil recovery is crucial for future competitiveness and value creation on the Norwegian Continental Shelf. T he recovery rate in producing fields constitutes a great potential for increased value creation. Already we have accomplished a lot having fields yielding recovery rates of 70 percent. However, we must continue our efforts to make marginal resources commercially viable.

Oil and Gas in the twenty-first century
The importance of research and development of new technologies for enhanced oil recovery is duly reflected in the Norwegian national technology strategy – called Oil and Gas in the twenty-first century. Government funding of petroleum research and development amounts to approximately 50 million euros a year. Roughly 25 percent of the allocated funds are assigned to Enhanced Oil Recovery projects.

Enhanced Oil Recovery technology and competence can prove to be useful not only for Norway, but for many petroleum provinces, and thus be a significant contribution in closing the energy gap.

According to the IEA natural gas will overtake coal by 2020 to become the second largest energy source after oil. Today, Norway covers approximately 16 percent of the European Union's gas consumption. In the next five-year-period, the total hydrocarbon production on the Norwegian Continental Shelf will increase by approximately ten percent from the preceding five-year-period. This increase can primarily be attributed to an increase in gas production. Two new pipelines to the UK, Langeled and Tampen Link, are currently being finalized and production from the first LNG based field development in Norway, Snøhvit, will start in 2007. This will bring the total Norwegian gas exports to approximately 130 bcm/year. Bearing in mind that the export in 2000 was approximately 50 bcm and that it today is well above 80, this represents a considerable increase. Gas production could reach this level early in the next decade. By increasing our gas exports, Norway can contribute to the replacement of more polluting energy sources and hence to a more environmentally friendly use of energy.

This means that Norway is well positioned to assist Europe in meeting its increased future gas demand. For Europe, Norwegian gas is a reliable source of supply that contributes to a diversified market and thus mitigating risk. In this way a competitive, well functioning gas market can be maintained in Europe.

New and alternative resources
I have so far concentrated on hydrocarbons. The question addressed by the Chair is whether new and alternative resources can help to close the energy gap? In the long term, I am convinced they can. Alternative energy must play a bigger role in the worlds future energy supply. It is a matter of urgency that we address this challenge by developing technologies for renewables in addition to reduction of CO2 emissions from fossile fuels.

The Norwegian government is committed to contributing to new and alternative resources. The Government will allocate 2,5 billion Euros in a fund in order to boost the production of renewable energy. Support will be given to increase the production of bio energy, wind power, small-scale hydro power and increased energy efficiency.

Renewable energy can contribute to a more reliable and diversified energy supply. It can contribute to solving the growing environmental challenges. We already see a wide range of possible sources and technologies coming closer to a market breakthrough.

However, despite enhanced focus on alternative resources, it will take time for them to make their impact felt. Fossil fuels will in the medium term be the dominant part of the energy mix. According to the IEA World Energy Outlook, fossil fuels will over the next 25 years have a market share of more than 80 percent!

Thus, we must make sure that we do not fail in our efforts to make both production and consumption of fossil fuels as clean as possible.

We are all aware of the fact that consumption of fossil fuels is the largest source of greenhouse gas emissions. It is crucial for the Norwegian government to contribute to the capture and storage of CO ₂ as a measure to reduce CO ₂ emissions. We have ambitious goals for achieving CO ₂ capture at gas fired power plants and for establishing a chain for transport and injection of CO ₂ into oil fields.

It is essential to identify technological solutions that can make capture and storage of CO ₂ a viable measure for reducing emissions of greenhouse gases. Using CO2 to increase oil recovery might contribute to cover the costs of capture and storage . Therefore , the government has initiated work to ensure progress in establishing CO ₂-chains. However, none of the possible CO ₂-chains identified can produce a positive net present value.

It is encouraging that industrial actors like Statoil and Shell are assessing power production at Tjeldbergodden, which can provide CO2 to the oil field Draugen and thereby increase the oil recovery. Further work remains to see whether this is technically possible and a viable economic solution.

The main challenge is to bring down CO ₂ capture costs and associated energy requirement. To this effect, we support demonstration and pilot projects, and spend about 18 million euros annually to keep up research, development and demonstration of such technologies.

Theoretically, the entire CO ₂ collected from Western-European sources could be fed into formations on the Norwegian Continental Shelf continuously for almost 400 years. Carbon storage in the North Sea is therefore a possible measure to reduce CO ₂ emissions, not only in Norway, but also for a greater part of Europe.

We appreciate cooperating with the UK, the EU and others towards this end. We firmly believe that international collaboration is required, as no country is capable of solving these challenges alone.

If the world energy future is in line with trends illustrated by the International Energy Agency's new publication Energy Technology Perspectives, Scenarios and Strategies to 2050 , CO ₂ emissions and oil demand will continue to grow rapidly.

Even with substantial efforts it will be very difficult to bring energy related CO2 emissions down to current levels in 2050. The magnitude of the challenge is enormous because we cannot stop there: The CO2 emissions must be reduced substantially below current levels in the years beyond 2050.

A sustainable energy future will not emerge without substantial efforts by both governments and industry. But a sustainable energy future is possible. We need to act now to promote, develop and deploy a full mix of energy technologies – including improved energy efficiency, renewables and carbon dioxide capture and storage.

Thank you for your attention