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Call for greater added value on Norwegian shelf

January 15, 2003, 00:00 CET

"What we do, or do not do, on the Norwegian shelf today, will have an impact for a long time ahead," said Norsk Hydro president and CEO Eivind Reiten, speaking at the Norwegian Petroleum Association's annual seminar.

Norwegian Minister of Finance Per Kristian Foss, Statoil CEO Olav Fjell, and Eivind Reiten were the key speakers at the two-day seminar that commenced on Tuesday. This year’s gathering – the 23rd in succession – was this year moved from Sandefjord to Lillehammer and is now open to the media. It was previously an exclusive event for politicians and top industry figures.

Torstein Dale Sjøtveit, who chairs the Association’s main committee, declared in his introduction that the Norwegian shelf is now mature and that the petroleum industry has reached a major crossroads. Given the enormous significance of the petroleum sector for Norwegian society, all parties – central and local politicians, civil servants and industry – will have to redouble their efforts in order to change the situation.

"We must find solutions that are long-term, and which balance the needs and requirements of companies, society and the environment," said Sjøtveit, who heads Exploration and Development Norway in Hydro.

He pointed out that exploration in Norway is still at a very low level, and that it is necessary to stimulate greater exploration generally. At the same time, the industry should be granted access to interesting acreage in areas considered more vulnerable.

"The oil industry plays such an important role in Norway that it should be critically assessed," he continued. "But it is also timely to focus on the important contributions made by the industry, in the form of research and development, in enhancing expertise, in addition to being the economic mainstay of Norwegian society."

Ripe for change

Eivind Reiten concentrated in his speech on the major challenges that the Norwegian petroleum industry, and Norway itself, face. The effects of the decisions made today will have an impact for a long time to come. Reiten believed that there is a real danger that Norwegian society will miss out on considerable revenues if the current framework is not changed.

He pointed out that tax and cost levels are extremely high compared with other oil provinces in the world. In addition, the results of recent years’ exploration have been disappointing, which means that the Norwegian shelf is weaker in competition with oil provinces in other countries.

Decreasing activity

Record high oil and gas production, plus very high oil prices, have generated substantial revenues from the Norwegian shelf of late. But Reiten warned that the level of activity is falling rapidly and he called for measures to give the oil industry a boost. To increase activity and ensure that the Norwegian shelf will also be an interesting area for oil industry investment in future, it is necessary to increase the available acreage and stimulate greater rates of recovery in the fields. It is also important to look into the way the work is organized and, not least, the fiscal framework. Here it is possible to draw a lesson from developments on the British shelf after production declined steeply from the mid-eighties. "Once the framework conditions had been amended, production increased considerably," said Reiten, who emphasized the importance of learning from others.

Describing Hydro’s oil business, Reiten stated that the company had proved its ability to carry out complex major projects. Comparisons have also revealed that Hydro figures among those companies with lowest operating costs. Hydro has a solid basis for growth – both in and outside Norway.