Foils from the speech in pdf

Distinguished Audience, Ladies and Gentlemen!
It is a great pleasure I address you today at the opening of Petrad's 8-weeks course. Welcome, all of you, to Norway. I hope you will have a pleasant and rewarding stay in our country!

Let me also express my acknowledgement to Petrad for their excellent work with the 8-weeks courses.

I consider Petrad an important tool in the government’s petroleum policy when it comes to facilitating international co-operation. The Government will continue to support this kind of work.

I am invited to speak to you on how the State organises the petroleum activities, and about the role and policy of the Ministry of Petroleum and Energy (MPE). Let me first highlight some facts about the Norwegian oil and gas activities:

Facts on the Norwegian oil and gas production
Oil was first discovered offshore Norway in the late sixties, and production started in 1971.

Norwegian crude production and exports
Since then we have continuously expanded our production capacity and expect to produce 2,75 million barrels a day this year. Our domestic oil consumption is limited, and thus we are ranked as the world's third largest exporter of crude oil.

Total Petroleum Production
Norway is also an important supplier of natural gas to Western Europe.

We currently have a total market share of about 15 per cent. And our ambition is to be a reliable supplier to Europe also in the future. There is a growing need for energy in Europe and the gas price has proven to be competitive. Besides, gas represents a more environmentally benign source of energy than both oil and coal, which adds to the future market potential for gas.

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 largest industry inNorway
To illustrate the importance of the oil and gas sector to Norway, let me mention that the sector made up 25 % of the Gross Domestic Product in 2005. This is makes it Norway's largest industry. In fact it represents about 17 times the total value creation of the primary industries and twice the manufacturing industries.

Through direct and indirect taxes as well as direct state ownership, the government secures a high proportion of the value creation. After more than 30 years of production the petroleum industry has generated net revenues for the state in the order of 2 800 billion NOK in today's money.

Exports are also immense, 35 times higher than the export value of fish. If we include refined products as well as petroleum related goods and services the export share is even higher.

Now, some words on how the Norwegian State organises the petroleum activities. I am sure you will learn more about this during your stay, but I hope this introduction will provide a useful overview.

The organisation of the Norwegian petroleum sector
The Norwegian Parliament (Stortinget) determines the framework for petroleum operations in Norway. The opening of new areas for exploration activities, approval of major development projects or issues of principle must be considered and approved by the Parliament. However, authority is also delegated to the Government and the Ministry of Petroleum and Energy.

Thus, overall administrative responsibility for petroleum operations on the Norwegian Continental Shelf rests within the Ministry of Petroleum and Energy. The Ministry of Labour and Social Inclusion has overall responsibility for the working environment and safety aspects of the petroleum sector. The Ministry of Finance has the responsibility for the Petroleum tax system and the Petroleum Fund.

The Norwegian Petroleum Directorate has an important role in resource management matters. It has control functions towards the industry and serves as an advisory body for the Ministry of Petroleum and Energy. Practically speaking, the Petroleum Directorate is mainly staffed with geologists and engineers, while the Ministries primarily employ personnel with experience in law or economics. The Petroleum Directorate is subordinated to the Ministry.

Until last year, it used to report to the Ministry of Labour and Social Inclusion concerning safety and working environment.

In 2003, however, the Norwegian Parliament (Storting) decided to split off the part of the Norwegian Petroleum Directorate that deals with safety and working environment into a separate supervisory body - the Petroleum Safety Authority (PSA). The new supervisory body has been in operation from 1 January 2004.

Thus, the resource section of the Norwegian Petroleum Directorate continues its work as a directorate reporting to the Ministry of Petroleum and Energy, while Petroleum Safety Authority reports to the Ministry of Labour and Social Inclusion.

The reorganization of the Norwegian Petroleum Directorate has been part of a wider scheme, regarding government supervision, where among other things independence and clarification of roles have been emphasised.

Government Ownership
In our petroleum policies, government ownership is one of the most important instruments.

There are two major Norwegian oil companies partially owned by the Government, Hydro and Statoil. Both are listed on the stock exchange and they are treated as any other independent, commercial company. Hydro comprises both petroleum and aluminium activities and government responsibility is vested in the Ministry of Trade and Industry. Thus, I will concentrate on the role of Statoil.

Statoil
Statoil was established in June 1972 as a fully state-owned oil company. This was regarded as important for ensuring the best possible government control over the development of Norway’s petroleum resources. In its early days, the company played an important role as an instrument in petroleum policy.

During its first years of operation the company was also given special treatment with regard to new acreage and operatorships. The company has since its foundation had a separate board of directors. Gradually the state's role towards the company has become less of a policy instrument. Significant changes took place in the mid 1980s, and since Norway entered the European Economic Area in 1994 Statoil has been regarded and treated as any other company on the Norwegian Continental Shelf.

Today the aim of the government is to act as a professional owner in line with the other shareholders, focusing on long-term development of profitable operations and creating value for all shareholders.

There is a sharp distinction between the government as an owner of Statoil and as regulator of the petroleum industry.

Statoil is to carry out exploration, production, transport and refining and marketing of petroleum and petroleum-derived products.

During the recent years Statoil has undergone significant changes. The company was partially privatised and listed on the Oslo and New York stock exchanges in June 2001.

As of today the state owns a 70.9 per cent stake of Statoil. The state will continue to be a substantial owner in the long term.

The change in Statoil's ownership structure has influenced the state's role and decision-making authority with respect to the company. The Provisions of the Public Limited Companies Act apply in full. The government intends to act as a professional owner in line with the other shareholders, focusing on long-term development of profitable operations and creating value for all shareholders.

Now partially privatised, Statoil is still in a special position holding important responsibilities in Norwegian oil and gas operations. Statoil operates most of the fields in which the SDFI (The State's Direct Financial Interest) has holdings. SDFI is a direct state ownership in the fields. Furthermore, the company is responsible for selling and marketing all of the state's oil and gas assets.

Petoro
As a wholly state-owned company, Statoil in the past provided commercial management of the SDFI. However, after Statoil's partial privatisation, this arrangement needed amendment. The solution was to set up a new company to manage the SDFI. In May 2001, this new "child" named Petoro AS was born.

Petoro is responsible for administering and managing the SDFI on the Norwegian Continental Shelf. The company's main objective is to maximise the economic value of the state's oil and gas portfolio. The SDFI assets are directly owned by the State. Thus, Petoro is not an oil company, but a pure management company acting on behalf of the State and fully owned by the State.

Main elements and challenges in our petroleum policies
Let me now share with you two key elements in Norwegian oil and gas policy:

• First, the Norwegian oil and gas resources are part of our national wealth. Thus, the whole population should benefit from the depletion of these resources. This implies that our petroleum revenues must be managed with the view of improving the welfare of present and future citizens of Norway. A Petroleum Fund has been established to this effect.
• Second, One important element in this respect has been to attract the best of international expertise and competence, and to promote co-operation between domestic and international players. Thus, we invite the oil companies to compete for licences to explore and produce oil and gas. This is essential for our resource management as the combination of domestic and international efforts ensures that we can maximise the value of our petroleum resources.

In the early days, the Norwegian oil and gas industry was very much an infant industry. This is no longer the case. Today the Norwegian petroleum cluster is characterised by strong competence environments in both oil companies, supply industry, research environments, shipping as well as within the bank and finance industry. In order to secure a long-term profitable development of the resources on the Norwegian Continental Shelf, it is essential that we maintain a strong competence environment within this industry in Norway.

Major policy objectives
In other words it is not sufficient to have a promising resource base. In addition:

• We have to make sure that the Norwegian Continental Shelf is competitive, that is we must be able to compete with other petroleum provinces in attracting investments and the best human capital.
• The Norwegian oil and gas industry must be competitive on a global scale. It must be able to take part in exploration and production activities in other petroleum provinces outside the NCS as well.

In order to meet these conditions the Government is among other things working to:

• Reinforce active exploration for oil and gas by providing access to prospective areas
• Establish a proactive strategy for the northern areas, including transboundary co-operation with Russia
• Facilitate research and development of new technology, including the development of a value chain for CO2.
• Support the internationalisation of the Norwegian oil and gas industry
• Maintain a high standard of HSE

Conclusion
To conclude, let me underline that Norway has a vibrant petroleum sector with great potentials. The resource base is promising and our industry has developed a strong competitive edge internationally. This has been obtained through the combined efforts of the industry and the Government through our policy regime. However, building a domestic petroleum industry had not been possible without the involvement of foreign oil companies and industry.

This is also one of the reasons why we find Petrad to be such a valuable part of the Norwegian petroleum cluster. Petrad is certainly contributing to a two-way learning process and extensive network that helps facilitate global co-operation in the petroleum industry.

Let me wish all participants and the organiser good luck with the training course!